Competing Visions for an Evolving Telecom Market

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Competing Visions for an Evolving Telecom Market

• The Honorable Marilyn Showalter
• Chairwoman,
• Washington Utilities Transportation Commission
• Mshowalter_at_wutc.wa.gov
• October 31, 2003
• Public Debate on Telecom Policy
• Lawrence, Kansas

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ANCIENT HISTORY

• Monopoly (ATT)
• Phone-Set Competition 80s
• Long Distance Competition 84

3
1996 Telecom ActTwin Goals

• Competition
• Universal Service

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THEORYCompetition Universal Service Fund
Diverse Services Everywhere at Comparable Prices
USF
5
REALITY- Uneven Development of Competition-
Uneven Distribution of Universal Service Funds
USF
USF
USF
6
COMPETITION Evidence

• Multiple Services
• Local Dial Tone
• Custom Calling Features
• E911
• Long Distance Access
• High-Speed Data Service
• Web-Based Voice Messaging

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COMPETITION Evidence

• Multiple Technologies
• Wireline
• Wireless
• Cable
• VOIP

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COMPETITION Evidence

• MULTIPLE PLAYERS
• Incumbents (SBC, Century)
• Competitors (MCI, Allegra, Ztel)
• Mobile (T-Mobile, Cingular)
• Cable (Cox, Comcast)
• VOIP (Vonage)

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Uneven Competitive Development

• Uneven Distribution of CLECs
• Wireless, Cable, VOIP Not Always Available as
  Alternatives

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Uneven Distribution of Federal Universal Service
Funds, e.g.,

• These 4 states and Puerto Rico get over 50 of
  the high-cost support for NON-RURAL companies

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Is Regulation the Problem or the Solution?

• Its Both!

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WHY REGULATE?

• ESSENTIAL PUBLIC SERVICE
• NETWORK THAT CONNECTS EVERYONE
• MARKETS DONT DELIVER
• Fairness
• Even Distribution of Services
• Even Distribution of Prices
• Political Accountability

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What Are the Appropriate Roles of Federal and
State Regulators?

• State and Federal
• Financial health of regulated companies
• Quality service at fair rates to all consumers

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Federal

• Broad public policy development
• National standards and guidelines

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States

• Fact-finding expertise
• Knowledge of local markets

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When to Regulate, When to Back Off

• That is the Question
• (But Who Gets to Answer it?)

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We Demand a Level Playing Field!
Regulator
RBOC
CLEC
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WE DEMAND A LEVEL PLAYING FIELD!
VOIP
Regulator
Wireless
RBOCs
CLECs
Long Distance
Cable
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Unbundling What is it?

• Competitors get to lease piece-parts of
  landline network
• Efficient Use of Network
• Combats Monopoly Power

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Unbundling

• Not a New Concept
• Phone sets
• Long Distance 84
• Directory Assistance competitive in many states

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Unbundling

• Quid Pro Quo of 1996 Act
• If Bells show they have opened their networks
  (and they did)
• Then Bells can get into long distance
• (and they did)

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Has the National Unbundling Policy Helped or
Hindered Telecommunications Competition?
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HELPED

• Lowered entry barriers
• Avoided duplication
• Allowed new services
• Prodded incumbents
• Reduced prices
• Increased long-distance competition

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Has the National Unbundling Policy Been Executed
Perfectly?

• No
• Complex regulations
• Inconsistent policies
• Rules changing over time
• Difficult facts and theory
• Disputes over sufficiency of lease-rates

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Must Unbundling Always Be a Component of Telecom
Policy?

• Not necessarily
• Technology changes over time
• New approaches may overtake need for unbundled
  access
• E.g., bundled local and long distance now
  allowed

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• Will Current Policies Stimulate Innovation in
  Telecommunications?

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Unbundling Brought Innovation and Expansion

• Phones new sets
• Long Distance lower prices
• Line Sharing spurred DSL

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Unbundling Allows Re-shuffling and Rebundling

• Allows packages for consumers
• New revenues for Bells
• Investment Money?

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But Relaxed of Broadband Rules May Slow Innovation

• New rules reduce likelihood of multiple wireline
  providers
• No more right to line-sharing
• No assured access to fiber loops
• Cable has monopoly areas
• (DSL not available everywhere)
• Duopoly elsewhere (cable, DSL)
• (But what about wireless?)

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Will current policies lead to greater
facilities-based competition?

• Uneconomic overbuilding should not be the
  objective
• Current policies are sending mixed signals
• Constant revisions discourage entrants and
  incumbents alike, but
• Principled requirements for open access can
  encourage smart competition

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Can States Meet Challenge of Triennial Review
Order?

• Federal-state roles have been in flux since 1996.
  However.
• States traditionally took lead in regulation
  nothing new
• State tasks
• Adjudication and fact finding
• Tight deadlines

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• State-level decisions more exact
• Granular level
• market
• geography
• evidence
• Companies
• States expect to meet deadlines

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REGULATION

• A Dynamic Process
• Not a Perfect Process

• But Its Better Than The Alternative (e.g.,
  unregulated monopoly power)
• (e.g., Federal-only regulation)