The myth of natural competition in the telecom sector.
I’m always amused when a think tank with an unassailable name like the Progress and Freedom Foundation (PFF) comes up with a “study” that purports to show that any kind of regulation–e.g. tobacco, guns, insurance–is an economic evil. In the political arena, these think tanks are nothing more than opinion farms, bought and paid for by private industry–a kind of covert lobbying group.
With the growth of tech lobbying groups, I guess it was only a matter of time before we have tech think tanks. Despite it’s innocuous name, the Progress and Freedom Foundation is a real think tank apparently supported by the Incumbent Local Exchange carriers (ILECs), otherwise known as baby bells.
One of the games I like to play with think tanks is to guess who supports them. It is usually pretty easy to figure out who their benefactors are–just read their opinions. In fact, the above is a guess–I do say “apparently.” The fact is, It’s Sunday night at 11:31 (long story) and I doubt if anyone is answering the phone at this hour for my fact check. So, we’ll just have to surmise that the ILECs are pulling the PFF’s strings.
Besides, it’s not a blind guess. The PFF has published study claiming that the Federal Communications Commission (FCC) has “has taken to try to create competition, under the auspices of 1996 Telecom Act has actually served as a life support system for doomed market entrants,” according to the report’s co-writer, Jeffrey Eisenach. The report suggests the FCC should pull the plug on the Competitive Local Exchange Carriers (CLECs) in order to allow “true” competition to occur.
From where I sit, the problem with the report is what plagues a lot of writing in the telecom area. It assumes that ILECs will compete against one another, which is not possible under the current market agreements. What we had before the CLECs was a system of localized monopolies. Contrary to the report, without CLECs, there would be no local phone and very little DSL competition.
One interesting aspect of the report is its blanket accusation of the CLEC’s lack the incentive to compete on the basis of better technology. Besides the fact that it’s simply untrue, what strikes me about this statement is that it describes the ILECs before the ’96 Telecom Act to a ‘T’. Those of us who were around when ISDN was all the rage know that the baby bells dragged their feet on ISDN. And they dragged their feet on DSL. I wonder how far along DSL roll-outs would be if the FCC had just sat on its hands and not enabled local competition–not as far as we are today, to be sure.
At least we wouldn’t be subjected to geek think tanks.
James Mathewson is editorial director of ComputerUser.com. Also check out his Insights column in ComputerUser magazine.