Babbio Bashes Price Regulation

An industry with the Marxist-sounding goal of getting the most technology into the hands of the largest number of people is held in shackles by the limitations imposed on it by federal pricing regulations.

This is the picture Verizon Communications Inc. (NYSE: VZ) vice chairman and president Lawrence T. Babbio painted of the telecom industry in his keynote speech at Supercomm 2002 today (see Verizon Bigwig Addresses Supercomm). And of course, there was nothing Marxist about it.

“I am absolutely proud to be a part of this industry,” he said. “[But] I would contend today that we’re out of balance.”

The imbalance, he said, is a result of the continued regulation of the prices regional Bell operating companies (RBOCs) can charge their competitors for access to their facilities. Verizon and other Baby Bells have long claimed that the regulations, which were upheld in the Supreme Court last month, cause unnatural and unfair prices (see Supremes Rule for Competitive Carriers). These, in turn, are delaying broadband deployment and are at least partially responsible for hindering the telecom industry from returning to profitability, they insist.

So what can we do to restore growth in the industry? The answer is simple, in Babbio's view: Deregulate DSL.

Of course, not everyone agrees with him. “This is not about deregulation, but about de-monopolization,” says Jonathan Askin, general counsel for the Association for Local Telecommunications Services (ALTS). “[The Bells] want to maintain their stranglehold control on captive consumers. The Supreme Court put to rest all of [their] absurd charges.”

Askin insists that it is now both easier and safer to deploy DSL, since the RBOC’s competitors will take on part of the cost, and they won’t have to bear the entire risk alone.

“It’s clear that both the RBOCs and their competitors are making substantial investments,” Russell Frisby, president of the Competitive Telecommunications Association, agrees. “[Babbio] says [the RBOCs] are eager to level the playing field. They’re eager to level the playing field by driving their competitors under it.”

Babbio, on the other hand, claims that it’s the RBOCs that are being driven under the playing field by policies that discourage, instead of encourage, companies like Verizon from investing in building out their broadband networks. It is time, he said, for regulators to step aside and allow the market to dictate which companies stay in the game.

Whether or not deregulation happens, and despite all the hardship the industry has faced over the past two years -- plagued by a rash of bankruptcies, restructurings, and plummeting stock prices -- Babbio says he's confident about the future of both Verizon and the overall industry. “This is an industry that still has great, great potential."

— Eugénie Larson, Reporter, Light Reading
jayja 12/4/2012 | 10:17:52 PM
re: Babbio Bashes Price Regulation Other journals (not LR!) reported that Babbio also cried that DSL is too cheap! He says it needs to be 40 - 50% more expensive than it is today. That way, it will be 2X what it costs in Japan and Canada today rather than only 1.5X.

On the other hand, where does Verizon actually have DSL? I've tried every exchange I know in my area code (607), and I can not find a one where Verizon offers DSL. Maybe because it's only $50/month.
litehearted 12/4/2012 | 10:18:13 PM
re: Babbio Bashes Price Regulation ILECs crying foul....Knock me over with a feather!!

Deregulate access charges to spur growth??!! Is that so they can charge more and snuff out any form of competition! I would like to pay more for access fees on my monthly bill!

The issue is to provide a new service that the customer needs! Not inflate the current cash cow. Very imaginative!

I will hand Babbio my generic crying towel, since I cannot afford the upgraded Kleenex. Life must be tough when you have a monopoly.
rafaelg 12/4/2012 | 10:18:22 PM
re: Babbio Bashes Price Regulation It is such mentality that has created the bottle neck in access to the last mile. "If I have to share it, I am not building it"
ILECS should get their bottle and stop whimpering.
If this industry is to recover, then the chokehold must be released. I am glad that there is someone out there for competition.

OOPs,I think I sound now like Harvey M. Sorry...
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