Telecom & Cable Regulation

“The Carnage of the Past Six Years”: Consumer Groups on Telecom Mergers

by on May 13, 2005

The dog-bites-man story of the past week was no doubt a petition filed at the FCC by the Consumer Federation of America, Consumers Union and US PIRG urging rejection of Verizon’s acquisition of MCI. The petition (virtually a carbon-copy of a filing by the same groups on the SBC-AT&T deal) was rather breathless in tone–warning of all kinds of consequences should the merger go through–destroyed competition, higher prices, bad breath, and so on. The chicken little claims are groundless–as discussed here and here both mergers are the natural consequence of the decline of the long-distance industry, and are a sign of a healthy, not a troubled industry. But what got my attention was an “I told you so” reference, arguing that the FCC made a mistake in OKing previous Bell mergers in 1999-2000, specifically SBC-Ameritech and the Bell Atlantic-GTE merger which formed Verizon. Specifically, they say:

“The Commission simply cannot look back on the carnage of the past six years and conclude that its decision to allow a handful of incumbents to dominate the local telecommunications market has served the public interest.”

What in heaven’s name are they talking about?

Continue reading →

SHARE:

“Hill Ponders Regulating Convergence”: A Note on the Proper Way to Solve “Level Playing Field” Concerns

by on April 21, 2005

Yesterday’s House Telecommunications Subcommittee hearing confirmed some of my worst fears about government regulation of new technologies / media, which I had discussed on Tuesday in this post.

Today’s Broadcasting & Cable includes a story about the hearing with the perfect title: “Hill Ponders Regulating Convergence.” That’s exactly what’s going on here with Congress and the FCC considering how to “level the (regulatory) playing field” as everyone tries to get into everyone else’s business. Illinois Republican John Shimkus is quoted in the story and what he said also frames the issue quite nicely: “How do we restructure the FCC to meet the new technological age. How do we justify different regulatory schemes when you are all competing in broadband.”

Continue reading →

SHARE:

Your Telephone Company Will Be Your Next Cable Company

by on April 19, 2005

[[cross-posted from PFF Blog]]

Verizon announced yesterday that it has struck a major deal with NBC Universal to carry all of NBC’s 12 cable networks on Verizon’s new fiber lines. This comes on the heels of Verizon penning deals with cable giants Discovery Communications and Liberty Media’s Starz Entertainment Group to carry the networks produced by those programmers. Now that they’ve got their foot in the door in a major way, expect Verizon to sign waves of programmers up for carriage on their new fiber networks.

Let’s step back for a moment and think about this. Verizon–one of the nation’s largest and most respected telecom operators–is about to become a full-fledged multichannel video operator. Since the mid-90s, telecom operators have been trying to figure out the best way to bust into the video market, but the numbers (or the technology) just didn’t work out right. Now the stars are aligned properly and telcos like Verizon are itching to jump into this market to justify the billions they are investing in those speed-of-light fiber systems. More importantly, the telcos know they have to do this NOW to stop the further hemorrhaging of customers to cable operators, which can now offer a communications “triple play”: voice, video, and data–all over a single line with a single bill.

Continue reading →

SHARE:

Boomerang Politics: Cable Industry Fights for Regulation

by on April 15, 2005

Kyle McSlarrow is, by all accounts, a good guy. I even voted for him when he ran unsuccessfully for Congress in my district a few years ago. It was a tough district, against a tough incumbent. That political challenge, however, was nothing compared to the challenges he now faces as cable’s man in Washington. The industry is threatened with regulation on numerous fronts–local governments are fighting for the right to regulate its Internet and telephone services, the new FCC chairman is talking of regulating cable tiering, and Congress is pushing to extend indecency censorship to cable.

Faced with these threats, McSlarrow–in his opening speech at NCTA’s recent annual convention–argued favor of regulation. Moments after making the case for minimal regulation of cable as it moves into the telephony business, saying that “we must avoid reflexively applying the traditional rules of the road” to this new service, he turned around and called for reflexively applying the traditional rules of the road to telephone companies who want to provide video. Specifically, he said, should be “required to make service available to all residents.” NCTA’s VP was even more direct, saying providers “must abide by certain social obligations, including building out entire communities, and not red-lining or cream-skimming.” (Reported in Tech Daily, April 13).

Such requirements, of course, have long discouraged new entrants into cable, and could end prospects for telco’s to provide video. Since telco franchise areas don’t track cable franchise areas, imposing these requirements could add billions to the cost of telco video, making it cost-prohibitive.

NCTA of course, knows that. But the strategy will likely boomerang. By arguing for regulation in this case, it will only encourage politicians to wield a stronger regulatory hand in other areas too–to cable’s detriment. Moreover, if potential competition to cable is thwarted, cable loses its best substantive argument against regulation of its business.

Of course, NCTA’s inconsistency is nothing new in Washington. As anyone who’s followed telecom lobbying for more than a week or so knows, industry lobbyists routinely argue for policies that help them gain a “fair advantage” over their rivals. It’s probably too much to expect industries to support free-markets policies (however rational) when it conflicts with their self-interest. But it is puzzling to see them supporting policies that will end up hurting them.

SHARE:

“The Device That Ate Everything”

by on March 17, 2005

I love that title from this new article in the latest Economist. The article is refering to the growing influence that mobile phones are having on society. There seemingly isn’t anything a cell phone can’t do for you these days, which has led to others referring to them as the “Swiss Army Knife of consumer electronics.”

You can play games, download videos, surf the Net, type e-mails, take pictures, schedule meetings, and oh yeah… you can call people too! Regardless of what you want to call them, mobile devices are revolutionizing the world of communications and challenging all the traditional assumptions about this sector being a natural monopoly. It always kills me to watch members of Congress or FCC regulators standing at a podium delivering a speech about how nothing has changed in the world of communications and how some of the old wireline players are still poised to quash all the competition. And then you look down and affixed to their waistlines is a veritable Batman-belt full of wireless gadgets. I’m not kidding, nobody on this planet uses more wireless devices than a U.S. Congressman. If you took away their Blackberries for a day, they’d have to shut down the government. (Not a bad idea now that I think about it.)

SHARE:

The Telecom Mergers Food Fight – Animal House II

by on March 16, 2005

Can’t you just picture it, Dick Notebaert, CEO of Qwest, yelling “food fight” in the manner of Bluto Blutarsky (John Belushi) in Animal House. Building upon James’s recent entry about the MCI merger, a new group has entered the food fight between Verizon and Qwest over who should buy MCI. The CLEC carriers – XO Communications, Savvis Communications, Eschelon Telecom, Cbeyond Communications, Covad Communications and Broadwing Communications announced yesterday that they formed a working group to challenge the acquisitions of both MCI and AT&T by legacy Bell companies.

The group consists of antitrust lawyers and economists, so it is clear that they intend to build an antitrust case against these mergers. Here we go, back to the “market definition” question. Will antitrust regulators look to telecom law to define the market, even though everyone agrees it is outdated and doesn’t reflect the market? Will they poll customers and interview people within the industry, and use this as the failed basis for the market definition, as was the case in DOJ’s lawsuit against Oracle?

Qwest started this food fight with their rent seeking behavior, in trying to convince Congress that it is the preferable candidate to acquire MCI (the heck with what the MCI shareholders say!). And as James says in his blog: “firms have (rightly) fought for years to relax the grip regulators have had on the industry. But now they are inviting those regulators to come right back in. Its a strategy they – and their customers – will regret.”

Indeed, we need to break away from the thought of telecom as one big regulatory fraternity, or else telecom companies will continue to yelp “Thank you, sir! May I have another?”

SHARE:

The MCI Foodfight: Shareholders, Not Regulators, Should Decide

by on March 11, 2005

Competition is heating up in the telecom industry, and not just for customers. Verizon’s bid for MCI–once thought a done deal — is being aggressively challenged by Qwest. After MCI’s board accepted Verizon’s $6.7 billion bid on Valentine’s Day, Qwest sweetened its own bid, offering some $8 billion. MCI’s board met this week to consider the offer, with a decision expected next week. This intra-Bell food fight should put paid to any notion that Bells are too monolithic to ever challenge one another. And it’s a good thing for investors–not least those with MCI stock.

The problem is that both sides are now making this a political issue. Qwest struck first and hardest, with high-profile statements by CEO Dick Notebaert that a Verizon-MCI merger would dangerously increase concentration and threaten competition in telecom. A media and lobbying campaign has followed–urging regulators to scrutinize the deal. Verizon has been much more restrained, although it too has played the political card, arguing that–because Quest owns an Internet backbone already–its deal could decrease competition.

Continue reading →

SHARE:

The Level 3 Petition – More Harm Than Good

by on March 8, 2005

I recently sent an open letter to Michael Powell and the other FCC Commissioners about the Level 3 petition. Level 3 sure has a genius of a petition out there. It is requesting that the FCC not apply access charges on VoIP calls that originate or terminate on the public switched telephone network (PSTN). This forbearance petition touches on key issues of interest regarding the future treatment of IP-based communications.

Under the rubric of “deregulation” Level 3 has created a possible arbitrage bonanza for itself. And the amazing thing is that many policy gurus (including Ray Gifford at PFF and Jeff Pulver) are in favor of it, although they too express reservations. The thought is that having IP traffic pay lower access charge rates (set by the states no less! – don’t we want the states out of this?) will somehow speed things up for broader intercarrier compensation reform. To me, though, it just doesn’t seem fair. And far from speeding up the process, it will entrench those VoIP companies that benefit from regulatory arbitrage and could end up hurting broader efforts at reform. That’s why the Commission should give this one a thumbs down. As I say:

Continue reading →

SHARE:

First Thing We Do Let’s Fire All The Lawyers

by on March 2, 2005

No one ever said there wouldn’t be losers from the planned MCI-Verizon merger. Among the most hard-hit, apparently, will be lawyers. The Legal Times reported recently that the merged firm is expected to “slash” its legal team, which includes 357 in-house attorneys, plus countless others in outside firms. The carnage might not stop there, as the Times quotes one lawyer saying: “Every firm that has a telecom practice is going to get squeezed.”

One problem is that, in addition to the normal sort of legal work any firm has, telecom companies have long devoted enormous resources litigating and lobbying against each other. MCI has been especially lawyer-dependent, with much of its business plan since 1996 dependent upon regulatory largesse. With this year’s mergers, that industry civil war may be be over, or at least be less intense. That’s good news for consumers–as the industry may actually be able to focus on serving customers rather than legal papers.

The heart breaks, however, for the JD’s that might be left behind. Perhaps an EsquireAid concert could be organized…

SHARE:

Merger Mania and the Nature of Network Competition

by on February 16, 2005

There’s been a lot of hand-wringing going on in the media and in Washington this week over the announced mergers of SBC-AT&T and Verizon-MCI. The Chicken Little crowd is out in force with their claims that the sky is going to fall on consumers should these mergers go forward.

The problem here is that too many people are still thinking about telecommunications in 1980s terms. We still talk about “local” versus “long-distance” providers as if they are distinct sectors. This is just silly. We have been witnessing the rapid death of what we used to call the long-distance sector. The rise of the wireless industry long ago decimated the long-term viability of long-distance sector. Consumers have always desired simple, flat-rate pricing for all their communications services and that’s what wireless gives them. With everyone now thinking in terms of buckets of minutes, it was only a matter of time before long distance was shown the door by most customers.

Continue reading →

SHARE:

← Previous Entries

Next Entries →