The timing was eerily reminiscent of the SBC-AT&T merger announcement two weeks ago. A weekend of speculation and negotiation, followed by an early morning announcement of the merger. This time, the happy couple was Verizon and MCI, with MCI being purchased for $6.7 billion. Its still early to gauge the reaction, but so far the news has been met with a loud yawn. The stock markets barely moved, and the political reaction has so far been muted. That’s for good reason–although the merger looks to be a good one for consumers, as well as the firms involved, it really just confirms changes long underway in telecom, rather than setting any radically new direction.
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The President’s Budget includes $304 million for the FCC in fiscal year 2006. That’s an increase from $281 million appropriated for this year. Number from past years (using FCC Change Analysis data):
2004 – $274 million
2003 – $268 million
2002 – $245 million
So if this budget amount goes through, we will have a 24% increase in the FCC budget from five years ago. The FCC’s press release lists some run-of-the-mill reasons why an increase is needed for FY2006 – salaries, benefits, office space, enhancing electronic filing systems. But it also mentions one reason that should ruffle the feathers of policy folks – “to fund additional staff to assist with program oversight associated with USF audit activities.” Of course this oversight funding is needed to counteract the fraud within the universal service program, especially E-Rate fraud, and to pay for the salary of Mark Stephens, who last week was named Special Advisor for Universal Service Fund Oversight in the Wireline Competition Bureau’s Telecommunications Access Policy Division (TAPD). As Universal Service grows out of control, so does the budget needed to administer it….
Some Virginia officials want to reform telecom taxes. Good idea. To get that much-needed job done they are considering “leveling the playing field” by imposing the exact same tax on all new forms of communications and information services. Bad idea.
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It’s official. After a week or so of speculation, SBC Communications announced that it is buying AT&T. The deal that Clinton FCC Chairman Reed Hundt once called “unthinkable” is now–pending regulatory approval–a reality.
The acquisition is a bit of a family reunion–SBC is, after all, one of the “baby bells” spun off by AT&T twenty years ago. A “Mother and Child” reunion, according to a Philadelphia Inquirer story last week. But does the deal signal a return to the old days of Ma Bell? Is the old Bell system family being revived?
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Like a lot of other Americans, I once had a big beef with the U.S. cable industry. Limited channel capacity and poor quality service were the primary reasons for my discontent. I remember the cable system my family subscribed to in the mid-1980s. It was like a Third World government operation at times. And I think we only had about 20 channels.
Jokes about “the cable guy” were common for a long time, of course. This made it easy for DBS providers like DirecTV and EchoStar to come in and pick off a lot of customers like me throughout the 1990s. By 1996, I had two satellite dishes on my roof and three DirecTV set-top boxes throughout my house. I thought I’d never talk to “the cable guy” again.
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For those of you who can’t imagine Christmas without a good dose of telecom policy, you should know about the Heartland Institute’s Telecom Reform Conference tomorrow and Saturday at the Hilton O’Hare. It promises to be a good one, with a focus on developments in the states. I’ll be there, speaking on a panel on Saturday, but this should be an interesting event nonetheless.
The media seemed flummoxed yesterday on the FCC’s order on UNE’s. Certainly not an easy thing to digest, and a scan of headlines shows them all over the board. Typical of the dueling headlines: CBS Marketwatch’s “FCC ruling seen benefiting Bells; critics blast decision“, vs. Forbes’ “FCC Decision ‘Slight Negative’ For Baby Bells“.
The substance here is a bit complex, and will take a while to sort out. (The full text hasn’t been released yet.) But the short story is that the FCC
did significantly cut back its rules on telephone companies yesterday, most notably taking mass-market switches off the shared assets table. This means telco’s will not have be forced to share their assets as much as before, meaning MORE investment, and MORE real competition, as others build their own networks.
The flip side is that the FCC KEPT far more rules in place they they should have. Most controversially: lines used to serve big office buildings in downtown areas. Although most downtown areas are intensely competitive–remember all those streets being torn up a few years ago? –the FCC will still force telcos to share their high-capacity lines with competitors in 99.5 percent of line centers.
Thus a mixed bag. Expect more litigation.
Well it seems like UNE-P – that wonderfully hyphenated acronym that in non-telecom speak stands for “pure reselling” – is on its way out. Today’s FCC press release gave us a teaser of the rules that the Commission adopted for network unbundling “open access” mandates. While there was some small reform of access rules for providers who are merely resellers, the Commission still hasn’t embraced the market alternatives available, leaving a narrow and misleading picture of the overall telecom marketplace.
Competition is much broader than just wireline vs. wireline. Indeed, CEI released a study today that finds that for every 1% increase in local phone rates, demand for wireless services increases by nearly 2%. Thus it concludes that there is true intermodal competition, despite the fact that the FCC rules do not acknowledge this. There is a check on wireline phone rates from going sky-high in the absence of UNE rules from cable, wireless and VoIP.
I think that the paper would be a good reference in light of the FCC Order, especially to refute the dissents of Copps and Adelstein, who proclaim that the sky is falling (and prices rising) for consumers. And long-term, the study will be important ammunition in the debate over telecom reform and how to think of “competition.”
And, because you UNE-buffs can’t get enough of this stuff, this excellent article by Randy May of the Progress and Freedom Foundation appears on National Review Online today…
Heritage just released this article on the upcoming UNE vote by the FCC:
Telecom Competition Rules: D©j Vu All Over Again?
by James L. Gattuso
WebMemo #621
December 14, 2004
On December 15, the Federal Communications Commission is expected to vote on regulations requiring telephone companies to lease, or “unbundle,” parts of their networks to competitors. The FCC has adopted rules on this subject three times since 1996, and all three times the rules have been struck down by the courts as overreaching.
On this fourth try, the FCC needs to get it right. This means limiting mandatory unbundling rules to markets where competition otherwise could not feasibly exist. Importantly, any such determination should take into account competition from new communications services, such as wireless and Internet telephony. The result would benefit consumers, as well as avoid an embarrassing fourth defeat for the FCC in court… (read the rest)
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