PANELISTS OFFER PREDICTABLE, UNUSUAL IDEAS FOR FIXING TELECOM ECONOMY

Precursor Group analyst Scott Cleland told audience what it already knew -- that industry is in mess financially -- and blamed it on govt. policy: “How bad is it? Real bad. How did it get so bad? Hugely wrong government assumptions.” Cleland said “a large part of the problem was the way the Telecom Act was implemented.” He said regulators took “competition uber alles approach” and didn’t pay enough attention to other part of Telecom Act’s goal -- deregulation. Legg Mason analyst Blair Levin, member of later panel, said Cleland was “a better analyst than historian” and took issue with idea that govt. policy was main culprit. Levin was FCC chief of staff under then-FCC Chmn. Reed Hundt, chief architect of competitive policies that Cleland criticized.

FCC Comr. Martin said govt.’s most important role was to create stable environment for industry by taking 3 actions: (1) Completing regulatory proceedings faster. (2) Focusing more on facilities-based competition. (3) Reviewing financial requirements that might deter stability such as state and federal excise taxes, franchise fees, universal service funding structure. Levin offered similar recommendations for govt. action: Move to more “sustainable and rational” universal service regime and “set clear rules.”

Levin also targeted conflicting state-federal jurisdiction as one of causes of current uncertainty. Asked by USTA Pres. Walter McCormick to explain, Levin said he would support phasing out retail regulation at state level. Dual regulation offers no certainty to investors, Levin said. For example, even if FCC eliminated some unbundled network elements (UNEs) in pending proceeding, states could put them back in, he said. Nor does TELRIC pricing process offer “clarity” to investors because it involves 2 regulatory jurisdictions, he said. XO Senior Vp Gerald Salemme said he agreed that it would be better for FCC to have sole jurisdiction over some responsibilities now shared with states. “I would also look at local” govt. overlap as well, he said.

Equipment sector is “suffering dearly” from telecom downturn said Corning Senior Vp Timothy Regan, who recommended High-Tech Broadband Coalition’s proposal to remove unbundling requirements from new network build-outs. Proposal is way to “stimulate investment without cutting off competition,” he said. Verizon Senior Vp Thomas Tauke said “it’s hard to develop competition in an industry that’s not healthy,” taking position similar to Regan’s. Unbundling discourages investment in new networks because “many companies are not convinced they will get a return on investment” because they have to share those networks with competitors “below cost,” he said.

“We need to do something radical,” said XO’s Salemme, who recommended govt. loans for development of last-mile facilities. “There is a fiber glut but a dearth of [competition] for the last mile,” he said: “We've got to target investment to last-mile alternatives. We need incentives for people to make investment. We need bold initiatives, not regulation in terms of price.” Tauke responded by saying “we need competition, we don’t need government subsidies.” Companies such as Lucent and Nortel “are being hurt by decisions we are making as a result of policy,” Tauke said: “I don’t think we need more government subsidies to overcome policy. It’s a change in policy we need.”