Guess Who’s Coming to the xchange magazine Blog?
November 14, 2008
You guessed it. This month I started a guest blog feature for xchange magazine on xchangemag.com. I posted my second xchange blog entry today entitled “Two Topics, One Conclusion” in which I wrote about how forbearance can help solve the fiber glut myth that exists. It also continues my commentary on the case for forbearance and answers a recent question I got:
“If all such forbearances were granted and the government stops watching, what will stop the ILECs from doubling prices where there isn’t competition and cutting prices in half where there is – thus ending the business case for anyone else to hook up more buildings with fiber? In other words, does granting forbearance necessarily lead to more choice?”
Here’s an excerpt from my post on the xchange blog:
Forbearance is the right tool to increase investment into local fiber optic infrastructure. This local fiber infrastructure is much needed to surpass today’s basic copper broadband to make the U.S. globally competitive in an array of industries.
As a result of being granted forbearance, ILECs will likely raise wholesale prices, as they should. This will generate profits for some, and for others, grant a timely death or consolidation. But as profits rise and regulatory certainty of forbearance manifests itself, then and only then will investment groups have an interest in entering the highly fixed cost business of local market competition on a fiber access platform. The worry that the ILECs will price everyone out of business is just a worry. Even the craziest of ILECs will recognize that if they get out of line, soon they would face regulatory scrutiny again. If anyone knows the touch point for monopolistic behavior, it is the ILEC. The last thing they want is more regulation when they have the control to avoid it. Control – understand that is what the ILEC is all about – from there, design your execution strategy.
Forbearance can also be a managed process. It does not necessarily represent a light switch. There can be safeguards and indices built into the process. But clearly, we need a sunset provision whereby all gloves are off the ILEC within five years. A five year sunset provision would mean that CLECs will have been given 17 years since CA 1996 to figure things out for themselves. Having such a sunset provision would clearly signal to investors that making high-cost investments in local fiber optic infrastructure is a value proposition and a long term advantage. Imagine if we had an eight-year sunset provision at the outset in 1996 – we would not be in the current mess. However, no one back then asked the non-celebrity types about regulatory policy – what could they possibly know? After all, they are from outside the beltway.
Is Dave right on or way off? Shoot Dave an email or post a comment below. You can also follow Dave’s xchange blog.
Written by Dave Rusin - Telecom Executive
Posted by admin | Filed Under American telecom, Forbearance, Telecom Blogs, Telecom USA, Telecom bloggers, Telecommunications bloggers, Telecommunications blogs, Telecommunications industry, Trends + telecommunications, Trends in telecommunications
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