Is it too late for FCC hearings?

Is the FCC simply too far behind the curve to act effectively when it comes to telecom services?

On Oct. 7, with a scant week’s public notice, the Federal Communications Commission opened an “en banc” or full commission hearing on the state of the telecom industry. The real question is whether there is any hope that good could come from such a hearing. Is the FCC simply too far behind the curve to act effectively?

It’s clear by now that the public-policy goals of the Telecommunications Act of 1996 in fostering “competition” to lower prices and promoting massive broadband empowerment were in fatal conflict from the start. But enough crying over the past. Can anything be done? Here are some ideas that have emerged, and forgive my cynicism but they sound suspiciously like “old times in telecom lobbying.”

First, we could force the regional Bell operating companies to break up into wholesale and retail businesses, reduce the wholesale and unbundled network equipment (UNE) prices dramatically, and let the competitors inherit the earth. This sure sounds like the old AT&T refrain, and all it would do is destabilize the only remaining financially reasonable sector of the industry – the RBOCs. Anyway, RBOC lobbyists can counter this set of suggestions. Rate this a nonstarter.

Second, we could give the RBOCs complete immunity from wholesaling and unbundling, making all RBOC competitors reach the customer via new infrastructure that the competitors build out, or reach those same customers with full-rate retail service connections obtained from the RBOCs. Sound like RBOC lobbyist-talk to you? It’s a death sentence for all the non-RBOC players. Another nonstarter.

Third, we could let the government step in, pay back all the money lost in the stock market when the competitive local exchange carriers and ISPs collapsed, and have a new national telecom network run by the U.S. Postal Service or some other organization. This is the “California Dreaming” proposal out of the Silicon Valley start-up sector. Get a life, people; no way taxpayers would ever stand for this, nor should they.

Fourth, we have the “let market dynamics take their course” approach, which means let the current lobbying activity create, through what might be called “financial incentives,” the proper regulatory and legislative framework – which will be the one with the biggest bucks behind it. Lobbyists like this approach, of course, and frankly, it looks like the one that will win.

That’s the problem. Why hold a conference to call in the usual suspects and find out what you already know? Politics, perhaps? The problem is that politics already has delayed the industry far too long. We need perhaps $50 billion in infrastructure investment over the next several years to modernize the public network for nonvoice services. We’ll never get it with regulations so fluid that nobody knows what Congress, the federal courts or the FCC will do next. We might well have killed Wall Street confidence in our market already. It might be too late.

But if it isn’t, here’s what we need:

• Tax credits for new infrastructure serving customers with broadband services. Give a big credit to anyone who deploys new digital infrastructure, no matter where, but add a provision that mandates achieving specific service and penetration goals or risk having the credit withdrawn.

• Regulatory balance. The RBOCs should have absolute immunity from unbundling new packet data infrastructure and DSL service elements. They also should have an absolute mandate to wholesale services over that new infrastructure, and to provide unbridled network elements in the traditional services and infrastructure area.

• Interconnect and settlement rules. We need a formal set of interfaces defined for all intercarrier connections (voice, data, Internet) and a formal set of procedures for tariffing the settlement among carriers associated with cross-carrier connection of customers. Lack of this formalism killed quality-of-service peering on the Internet, and continued failure to address this issue will doom small players and perhaps even emerging content applications.

How about it, FCC? What do you think?