Regulators Take a Beating at USTA

LAS VEGAS -- Is the United States Telecom Association (USTA) working toward empire preservation? Or is it trying to unleash a wave of innovation that's being held back by federal regulations?

There have been shades of both extremes at the telecom group's annual meeting here. With flair and showmanship, speaker after speaker has verbally drilled federal regulators for maintaining the requirement that incumbent carriers -- the USTA's base membership -- share their facilities with competitors.

Though incumbent carriers still control the majority of U.S. access lines, they face greater competition these days from cable companies and some wireless providers that aren't partly owned by the incumbents. And, in the eyes of the USTA, if a consumer has more than one place to turn for broadband access -- no matter how expensive or impractical for the consumer -- the mere existence of that choice should move regulators to question the regulations first put in place by the Telecom Act of 1996.

"The goals of the '96 Act have been more than achieved with regard to giving consumers the kind of choice that they need in access technologies," Walter McCormick Jr., the USTA's president and CEO, told reporters during a luncheon. "If the consumer is not captive and the consumer has choice, why do we need the surrogate of regulation that was established for a monopoly environment when the consumer had no choice?" "Regulators don't need to continue refereeing the competition issues when the market is teeming with competitors," said Bill Daley, president of SBC Communications Inc. (NYSE: SBC). "We are staring down the barrel at the prospect of 50 state impairment proceedings... to address some basic issues that I'm sure lawyers can turn into a nightmare that would make Kafka's head spin." Regarding the free Internet telephony service offered by Skype, outgoing USTA chair Margaret Greene, a BellSouth executive, asked the audience here: "Why, when we're competing with free [phone calls], are our companies alone subjected to punitive regulation?" (See Skype Me? Skype You!.)

Of course, non-incumbent carriers -- such as long-distance operators that are trying to offer local phone services -- aren't in sync with the USTA's view. AT&T Corp. (NYSE: T) CEO David Dorman, in particular, has long been vocal that regulators need to play the role of referee so that incumbents won't have "artificial advantages" at the expense of competitors (see AT&T's Dorman: Competition Is Good).

The complex issues of how involved regulators should be in the telecom industry -- and what they should do to mend the telecom recession -- won't be solved at this show. But they will be discussed at length, as Federal Communications Commission (FCC) chairman Michael Powell and rival FCC commissioner Kevin Martin are both scheduled to make appearances here on Tuesday (see FCC's Martin: Ruling 'Balanced' and FCC's Powell to Resign... Someday).

Meanwhile, the USTA is prospering, as equipment vendors gobble up booth space in a rush to market the incumbents, which remain the strongest spenders in the telecom recession. Attendance figures aren't yet available, but last year's USTA show added 50 percent more exhibit space and saw 15 percent more attendees than the 2001 show.

— Phil Harvey, Senior Editor, Light Reading

materialgirl 12/4/2012 | 11:20:25 PM
re: Regulators Take a Beating at USTA This note goes to show the power of relativity. Although the incumbents control assets paid for via monopoly pricing, they feel as though they "own" them. They do not want anyone to threaten their position.

Competitors like ATT, however, understand exactly how the incumbents were bribed into providing service. They want their share of those sunk investments. Both arguements make perfect sense to the party involved.

It is up to the regulators in this instance, however, to provide the oversight needed to insure that those sunk assets are indeed put to the highest and best use. This will not make the incumbents happy. It should, however, make users happier.
rjmcmahon 12/4/2012 | 11:20:23 PM
re: Regulators Take a Beating at USTA This note goes to show the power of relativity.

Not related to this article one iota, but if I were an incumbent telco staff member or an investor in such a misguided company, I'd be asking which industries haven't met their pension promises made to previous staffs and exactly why not. This entrenched incumbant thinking and their "relativity" may not be the right ideal for folks planning for retirement needs.

Testimony of Steven A. Kandarian, October 14, 2003
Executive Director
Before the
October 14, 2003

As of December 31, 2000, total underfunding in the single-employer defined benefit system was less than $50 billion. Because of declining interest rates and equity values, as of December 31, 2002 - two years later - the total underfunding in single-employer plans exceeded $400 billion, the largest number ever recorded. Even with recent rises in the stock market and interest rates, PBGC projects that underfunding still exceeds $350 billion today.

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