Consumers Benefit from an Open, Fair Telecom Market

The arguments against a comprehensive review of telecommunications policies and regulations should be ignored as a matter of public interest and consumer welfare.

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The AT&T, Inc. logo is seen on on of the company's buildings in San Antonio in this April 25, 2006 file photo. AT&T Inc., the nation's largest telecommunications company, on Tuesday, Oct. 23, 2007 reported net income of $3.1 billion in the third quarter, a 42 percent jump from the previous year before its acquisition of BellSouth Corp. was completed.

David Balto is an antitrust attorney in Washington, D.C. Mr. Balto has over 20 years of experience as an antitrust attorney in the private sector, the Antitrust Division of the Department of Justice, and the Federal Trade Commission, where he was the policy director of the Bureau of Competition and attorney adviser to Chairman Robert Pitofsky.

Congress made a clear choice to prefer competition over regulation when it enacted the Telecommunications Act of 1996, whose stated goal was "to provide for a pro-competitive, de-regulatory national policy framework designed to accelerate rapidly private sector deployment of advanced information technologies and services to all Americans by opening all telecommunications markets to competition." The legislation was a landmark event that anticipated the exchange of regulation for competition that would lead to improved quality, increased choice, and accelerated innovation through an incentive structure that promotes investment by entrants and established firms alike. The heavy hand of regulation in industries embodying dynamic innovation proved unsuccessful, and while the evolution to a more open market has been slow, now is the perfect time to reaffirm this commitment to competition. Recent announcements of further investment and development in our high-tech information infrastructure are all the more reason to be optimistic.

AT&T's recent announcement that it will be investing $14 billion over the next three years to improve and expand its wireless and landline broadband networks is another step in the right direction. The announcement drew acclaim from Sen. John Kerry, who stated, "AT&T is making a great bet on America and we should all applaud it," as well as Federal Communications Commission Chairman Julius Genachowski, who praised the nearly "$200 billion of investment" that AT&T, Verizon, and others have placed in the "powerful growth in the Internet economy." I applaud this announcement not just for what it means on its face—a significant improvement in our broadband networks—but also for what it represents: the continued ability of open market competition to achieve what regulation would not. This is what happens when policy and economics align in favor of the consumer.

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It is no secret that investment into our telecommunications infrastructure is sorely needed. Chairman Genachowski explained in a 2010 editorial, "Our nation is at a high-tech crossroads: Either we commit to creating world-leading broadband networks to make sure that the next waves of innovation and business growth occur here, or we stand pat and watch inventions and jobs migrate to those parts of the world with better, faster and cheaper communications infrastructures." This past August, the Federal Communication Commission's annual report concluded that for the third year in a row, broadband deployment in the United States is lacking. Firms are answering the call to arms by investing in the infrastructure we need, and the last thing we need are more hurdles to delay or deny these incentives. 

Unfortunately, vestigial requirements dampen the incentive for incumbent firms to invest. These include requirements to maintain old technology at the expense of investing all available capital in next generation networks and technologies, and the risk of having next generation broadband services subject to regulations originally designed for a stove-piped world of voice-only services. At least one broadband provider has asked the federal regulator to commence a national dialogue about how to move the country to an all IP broadband infrastructure, while ensuring all Americans continue to have access to reliable communications services. AT&T has petitioned the Federal Communications Commission to consider eliminating legacy rules in an efficient, comprehensive forum and has argued that these obligations are nothing but impediments to a transition to 21st century networks. It is unclear to me what the appropriate regulatory framework should be for all IP-based service, but one thing is clear to me: It is in the best interests of the consumer to address these questions comprehensively and immediately in order to give guidance and eliminate risk of stranded investment or uncertain business models for firms interested and willing to invest in broadband networks.

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Although the Telecom Act infused a much needed dose of competition into the traditional landline world, the fact remains that telecommunications is still widely regulated and we are seeing the natural outgrowth of a widely regulated industry—rent-seeking by competitors. Some of the smaller competitors to AT&T have responded to the "Velocity IP" petition by arguing that a comprehensive analysis is improper, and instead argue that a 37-proceeding process for answering these questions is better. This is a baffling argument. Continued uncertainty and confusion are the enemy of investment, innovation, and ultimately consumers. One such filing suggests that the Federal Communications Commission remain "laser-focused" on "updating competition rules" but that the commission should "retain its basic regulatory framework" while assessing what rules need changing. As a former regulator, I recognize this as a request to allow for further requests. 

This same filing calls the commission's "failure to update its competition policies" a serious problem for the broadband economy, and even quotes the National Broadband Plan as calling the current state of affairs "unfortunately….a hodgepodge of wholesale access rights and pricing mechanisms that were developed without the benefit of a consistent, rigorous analytical framework." It seems to me that the best way to address this unfortunate state of affairs is a consistent, rigorous analytical framework. And the best way to achieve this is through a comprehensive proceeding.

Finally, AT&T's proposal calls for a process that will generate more data to inform future regulatory decisions. Opponents call this a "waste" of resources. This is simply not true, and suggests the opponents want to have their cake and eat it too. The Federal Communications Commission may determine that fossils of regulation are still in the public interest, but this decision must be reached after analyzing information and data. It makes no sense to impede market forces on the one hand, but limit the commission's ability to collect information on the other. The arguments against a comprehensive review of the policies and regulations for technologies that we are currently deploying amount to little more than classic competitor rent-seeking behavior, and should be ignored as a matter of public interest and consumer welfare.

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