For the record
December 12, 2008
If you haven’t read or at least skimmed the House report, DECEPTION AND DISTRACTION: THE FEDERAL COMMUNICATIONS COMMISSION UNDER CHAIRMAN KEVIN J. MARTIN, I encourage you to do so. On Wednesday I wrote in the blog post “Hate to say ‘I told you so’” that non-ILECs should stick to focusing time and money on infrastructure.
For the record, a few years back, I had a meeting with the president of Comptel at our offices. We discussed openly and candidly the lack of success non-ILEC lobbying efforts has had inside the beltway. I will keep the majority of the conversation private. However, I did provide a bold strategy for Comptel to consider. I suggested that Comptel issue a press release stating that the non-ILECs represented by Comptel have given up and that the ILECs and cable companies have the FCC and Congress in their back pockets. Comptel members are no longer going to fund lobbying efforts to effectuate competition. Comptel would no longer encourage membership to lobby independently as well. Comptel, the last remaining non-ILEC membership group, surrenders to the FCC and Congress. I suggested that doing this will get Comptel and its members all sorts of Congressional hearings. But alas, my suggestion was ignored.
As you will find in the Martin allegations, the game is rigged. It’s a house of mirrors. As we are slowly learning in America, justice, opportunity and fairness is a function of how much you can afford to spend whenever our government or politicians are involved. Just look at the picking the winners and losers on Wall Street by Congress in our financial crisis. The responsible companies are getting punished while “the too big to fail” real smart guys (RSGs) get bailed out. There is a bit of poetic irony with the banking firms selectively being bailed out – all those years banks picked winners or losers for investment not on the basis of merit, accomplishment or experience, but by whom you knew or were referred by.
Has America lost its direction? I would like to hear your opinion.
Sound off now by posting a comment below or by shooting Dave an email.
Part I: The Forbearance Bandwagon
October 20, 2008
We took a break from forbearance for a bit – but I was asked by Rob Powell over at TelecomRamblings.com a while ago to make a case for forbearance, and I didn’t want to leave that question unanswered. Here’s what he said:
So Dave, to get me to jump off the fence and onto your bandwagon, can you answer this question? 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?
Let’s have a reality check. Telecom is a high fixed cost, fixed asset business. For the life of me, I can’t figure out how the self-proclaimed “National CLECs” think for a billion dollars in debt/equity that they can compete on a national basis with an ILEC that spent tens of billions of dollars over 100 years just to get where we are today. Please no whining about guaranteed rates of return – it bolsters my argument as to why there should have been zero incentive for any “rational CEO” CLEC to have bought/rented anything from an ILEC.
Before we are ever going to see this alleged plethora of highly rich, user defined applications, there is an inherent need for bandwidth. And I am not talking about “basic” broadband that is dominant today. I am talking about 50 megabits ubiquitously within three years and 1 gigabit ubiquitously within ten years. Sorry to say, but this requires fiber, not rented copper. Inside baseball – don’t tell anyone – the ILECs know the need for fiber. That’s why they are spending over $30 billion annually on new builds though, according to Wall Street experts not so long ago, we had this HUGE fiber glut. As of today, does Wall Street have any credibility with anyone besides themselves?
Like Lehman Brothers, Bear Sterns and more to follow, let telecom wholesale prices rise by way of forbearance to weed out the weak balance sheets. Those running a telecom business on paper (like Wall Street has) by colocations and renting – let this brilliant management group demonstrate their abilities to compete without any more government supports. The CA 1996 is 12 years old; do the asset-light CLECs deserve another 12 years to figure things out? I can’t help it that they took their investors money and went 100 miles wide but an inch deep. Perhaps, like a few of us have done, if they decided to go 20 miles wide but 10 feet deep, I would not have to point this out. However, these CEOs had choices to make over the past 12 years; they had a business plan that gave investors a choice to invest or pass. It is time to lift wholesale rates vis-à -vis forbearance.
Stay with me. Much more to come in this dialogue.
Do you want Dave to shoot straight on another telecom topic of interest to you? Shoot him an email or post your comment/question below.
Why is Forbearance a Good Thing?
July 25, 2008
Let’s have a fantasy for a short minute…
Assume that the FCC, Lobbyists and Congress actual took an Economics 101 course. By granting forbearance, in the short term, wholesale prices will and should go up thus generating higher profits. As higher profits are generated, new capital will flow into the market for a share of this new found profit opportunity. New entrants, having the wisdom of the past 12 years, would rationalize their entry in raising the bar of performance.
Translated: new entrants will build new strategic facilities and offer optical connectivity that would elevate the United States on a globally competitive basis … considering our poor rankings. A byproduct of this is that the consumer is more connected globally, without limits, and may innovate as he or she may wish. Generating more true facility based competition in the long run will lower the price per bit to the consumer.
What forbearance does is stifle pent-up demand. When the FCC maintains/limits competition to legacy copper facilities where do they think we are going? This supply protectionist desire by the FCC to stimulate “demand” has not demonstrated anything appreciable in the world theater of global competitiveness on the part of the United States. The same FCC that denies forbearance is the same FCC that said cable company infrastructure is closed to competitors and new fiber deployments by ILECs are closed to others. It’s the same FCC that is trying to figure out how much a pole attachment should cost depending upon what application that a physical cable may be carrying!!!
Declaring a victory for a denial of forbearance, in my opinion, is stifling to our economy and global competitiveness. We need more true facilities based competitors not less. The FCC is not encouraging new entrants; they have handed the ILECs one sweet deal, and the CLECs in plausible denial clap/applaud as the FCC continues to stifle new infrastructure investment while the ILECs and cable companies build out optically.
Now the average whiner will say: “But if we don’t have access to their copper …”
Here is the reality: anyone and everyone relying on Ma Bell for type 2 circuits are in the same boat … you all pass on the costs and a small margin to the customer. If the ILEC raises wholesale prices, everyone will pass them along as well, assuming you are a rational competitor. Plus, if type 2 access was of such strategic importance, I am befuddled by the lack of wireless last mile access that can emulate the limitations of copper or exceed it. There is true technology choice available to all competitors for copper equivalent data rates by wireless access.
The proverbial horse left the barn 12 years ago. What needs to be done is quite simple. The FCC should sunset wholesale regulations in a declining manner over the next five years, At the end of five years, the wholesale market would be driven by market-based facility competition and priced accordingly.
One would think that after 17 years, if you have not figured out how not to rely on Ma Bell, you never will.
Remember: the softest pillow is a clear conscience.
Forbearance is Good for America
July 22, 2008
Here I go again being unpopular.
The most recent forbearance petition denial of Qwest by the FCC is not a step forward in the interests of the consumer or our nation. It is a step backwards.
The Communications Act of 1996 was allegedly designed to foster competition in the interest of consumers of telecommunication services. The Communications Act of 1996 was not designed to benefit competitors. It has been 12 long years and what do we have? A bunch of competitors of Ma Bell that still want to hang off of her teat. It’s been 12 years … when will competitors figure out how not to rely on Ma Bell? Are these same competitors going to lobby Congress for perhaps another 12 years? That would make it a quarter of a century of government protection on a class of competitors that want to hold this country back because they don’t get it (and neither does Wall Street).
If the FCC truly wants consumer advantage, it would get out of the way and stop providing this form of corporate protectionism. After all, isn’t 12 years a long time to figure things out? We sent a man to the moon in less time.
I believe in open market competition. Markets will sort themselves out. Artificially regulating wholesale prices hinders growth, it does not encourage growth or investment.
Next time we’ll talk about why forbearance has a positive impact for the United States globally.
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