Execs to FCC: Let Telcos Fail

WASHINGTON -- An influential group of Internet analysts and business executives today urged the Federal Communications Commission (FCC) to let failing telecom companies fail, and "fail fast." The 44 signatories, led by independent telecommunications analyst David Isenberg, said in a letter to FCC Chairman Michael Powell that Internet-based technologies are subsuming the value embodied in the traditional telecommunications networks. According to the group, "This is causing the immediate obsolescence of the vertically integrated, circuit-based telephony industry of 126 years vintage. [Telephone company] bonds used to purchase now-obsolete infrastructure assets have become (or are inexorably becoming) bad debt." The group urges the FCC to resist telephone company pressure tactics to prop up businesses that technological progress has made obsolete, in order that advances in newer, better forms of communication not be stifled. Calling the current telecom troubles "not a disaster, but a natural event," the letter says a "revolution in productivity and human benefit as big as the agricultural and industrial revolution" could result. "Too many business analysts are talking about bubbles and over-leveraged balance sheets as the root cause of current telecom troubles," said Isenberg, commenting on the letter. "This confuses the symptoms with the disease. These things are just symptoms of the fact that Internet technology has made phone companies obsolete. If the government tries to treat the symptoms, the American economy will actually stay sick longer than if the natural process is allowed to run its course." The proper course, according to Isenberg, is to write down all circuit- based telephone assets to reflect their obsolete value, and re-capitalize the industry with as little government intervention as possible. "People will continue to use the existing telephone network for years to come, just as people still rode in horse-drawn carriages for years after the automobile was invented. But the government never subsidized buggy whip makers, and it should not subsidize telcos now." Federal Communications Commission (FCC)