POLICY VETERANS PROFESS OPTIMISM ABOUT FUTURE OF COMPETITION
Don’t write off local competition because it takes time for rival services to take hold, several veteran regulators said at conference Thurs. sponsored by Competition Policy Institute. Robert Atkinson, former executive at pioneer CLEC Teleport and later on FCC staff, told audience “it took 10 years to get the technology and economics right” for Teleport to be successful in late 1980s. Current situation is “better than you think and worse than it could be,” said Atkinson, now exec. dir. of Columbia Institute for Tele-Information. Best way to view state of competition now is to look “granularly” by geographic area and type of customer, he said. “There’s more competition in New York and less in Montana,” Atkinson said. Competition may come from “names we don’t recognize” such as gas and electric distribution businesses, he said, adding that he expects cable to be much bigger in local telephony: “I'm very optimistic about competition in certain markets.”
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Atkinson and other panelist such as ex-FCC Comr. Susan Ness and ex-FCC Chief of Staff Blair Levin, said it’s not fair to put all of blame on investment firms for failure of CLECs this year. Atkinson noted that Teleport didn’t go public until it was 10 years old and was making money. “You need visionary private investors” before even contemplating public offerings, he said. Ness said that for CLECs to get capital, there has to be less uncertainty about telecom sector. She expressed concern that policymakers may be signaling uncertainty by reviewing “all the issues we dealt with before,” citing inquiries by FCC and others into unbundled network element (UNE) and broadband policies. Inquiries appear to be asking right questions but “the message to Wall Street is this is all going to be undone so why invest now,” Ness said. She advised policymakers to make decisions “swiftly” because lengthy period of “indecision” could lead to telecom companies’ having difficulty gaining funds.
Ness said FCC didn’t realize how hard it would be to get operations support systems properly operating or how easy it would be for various segments of industry to delay others’ entry. She took swing at recent mantra in favor of facilities-based competition, which she said had increased after Sept. 11 terrorist attacks: “I hope the pillars of competition aren’t taken down with the World Trade Center.” Among the advice she would give to new regulators: “You can’t force competitors to compete if they don’t want to. You can’t force incumbents to compete with each other. Give it certainty, give it time, but you cannot encourage inefficient competition.”
Ex-FCC Chief of Staff Levin, now analyst at Legg Mason, blamed CLEC demise on “change in philosophy” by investors. He said investors basically decided new competitors couldn’t make money. Situation could worsen as FCC looks at easing rules such as wireless spectrum cap, “changing rules to create a more consolidated industry, both horizontally and competitively.” Levin said “the practical reality today is there are very few unthinkable mergers,” referring to comment by his one-time boss ex-FCC Chmn. Reed Hundt that AT&T-SBC merger was unthinkable. Ability of telephone companies to aggregate markets may have some consumer benefits, Levin said, but “what are the prospects for innovation?” He said innovation was more beneficial to consumers than even pricing. “I worry about innovation in content applications.” Applications are key to growth in telecom industry, he said.
NTIA Dir. Nancy Victory told group that NTIA’s broadband inquiry would ask, among other things, why take rate was so low, what definition should be used to describe broadband, how to promote competition. Inquiry, with comments due Dec. 19, also asks, she said: Whether FCC’s TELRIC (Total Element Long-Run Incremental Cost) pricing model creates any problems, what state or local impediments exit, whether there are impediments to accessing federal facilities. She said in lunch speech that agency would like comment on “old wires-old regulation, new wires-new regulation” concept offered by some in industry such as Verizon. She said NTIA hoped to enlist help from NARUC and state PUCs to develop policies that promoted building of broadband facilities to homes and small businesses.