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Regulation

Powell Peeves Competitive Carriers

When the going gets tough, the tough go to Washington.

That appears to be the case with many struggling competitive carriers, who say that Federal Communications Commission (FCC) Chairman Michael K. Powell is showing unusual favoritism toward incumbent carriers and doing little to help the struggling telecom industry.

Over the past six months, competitive carriers have complained that Powell has been too heavily influenced by the regional Bell operating companies (RBOCs). But Chairman Powell's recent comments that financial problems plaguing the telecom sector have been in part due to an overabundance of providers has ignited a firestorm among competitive carriers, who feel they are being outlobbied by the deep-pocketed RBOCs.

“We are concerned that they are moving forward with deregulation without establishing an efficient competitive market,” says Russell Frisby, president of the Competitive Telecommunications Association (CompTel), an industry association that includes many competitive carriers. “Obviously, there is a tremendous political battle being waged and Powell is being influenced. We are trying to counter that.”

Last week, the Wall Street Journal reported that Powell said he thinks the FCC may have made a mistake “by implicitly encouraging the formation of hundreds of Bell competitors without realizing how few of them would ultimately be able to survive.” At the height of the bubble, venture capitalists were throwing money into companies that were trying to quickly expand their networks. Since then, many have filed for bankruptcy, and many of those remaining teeter on the edge of it.

The article quotes Powell as saying, "We correctly believed these markets didn't need to be natural monopolies and they could be competitive, but I think we tended to over-exaggerate how quickly and how dramatically it could become competitive.”

Competitive carriers and their industry lobby groups were infuriated by the comments. In response, the Association for Local Telecommunications Services (ALTS) and CompTel blasted the Commission in a letter they jointly drafted and sent to the chairman’s office. In the letter, they called for the Commission to return to its original intention, calling for a freeze on three of its current proceedings, which they believe are pro-RBOC and will ultimately lead to more deregulation.

The FCC says it is still evaluating the letter and has not made any changes to its proceedings. As for charges of favoritism, an FCC spokesperson said that the FCC’s priority is simply to clear up regulatory uncertainty as quickly as possible.

In the last several months, the FCC initiated three main proceedings that review rules and definitions laid out in the Telecom Act of 1996 with regard to broadband.

The first is the Triennial Review of Unbundled Network Elements, a proceeding that will completely review the Commission’s rules determining which elements of a network should be considered for unbundling. The second, known as the Broadband Structural Notice of Proposed Rulemaking (NPRM), is a proceeding that is reviewing the classification of broadband traffic as either an information service or telecommunications service (see FCC Claims Authority on Cable Modem). The third proceeding is a review of whether or not RBOCs can be classified as dominant players in particular markets. This will determine which carriers will be subject to unbundling rules.

Comments have been solicited on each of these proceedings, with a second round of comments due last week. Formal decisions on these matters are expected from the FCC by the end of year, according to Powell’s office. But no official date has been set.

In the letter to Powell, the groups called for a suspension of all three of these proceedings. The groups are urging the Commission to first review barriers to competition before it considers changing some of its rules in the direction of deregulation.

“The chairman needs to go back to the basics and make sure there is competition, and once barriers are removed then he can look to deregulating the Bells. We think he is putting the cart before the horse.”

Competitive carriers were already skeptical of the Commission’s intentions when it first opened these proceedings, but recent comments by Powell and Commissioner Kathleen Abernathy in the face of the WorldCom Inc. (Nasdaq: WCOME) debacle has added fuel to the fire (see FCC Focuses on DSL Classification).

“It is becoming more and more evident through recent comments from Powell and Abernathy that there is a very pro-Bell agenda at work here,” says Jason Oxman, vice president of Covad Communications Inc. (OTC: COVD). “We are disappointed, because in a time of crisis for the industry, Powell has proposed eliminating all the safeguards for competition.”

— Marguerite Reardon, Senior Editor, Light Reading
http://www.lightreading.com
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optical_guy 12/4/2012 | 10:03:23 PM
re: Powell Peeves Competitive Carriers I rather agree with Powell, right now we have the worst of both worlds, on one hand there are theRBOCs with no incentive to grow and on the other there too many competitive carriers trying to operate in an environment where there is insufficient teeth in the shared access requirements. So the RBOCS aren't moving and the competitive guys can't. Pick to support one or the other, but get us back on our feet with some kind of healthy telecom industry.
reoptic 12/4/2012 | 10:03:22 PM
re: Powell Peeves Competitive Carriers Powell is rightly worried about the service loss and dispuption from more bankruptcies and losses. WCOM can still be disaster with 25% of the internet on shaky ground. Things can get worse. National security and communications infrastructure is more important now than these competitive carriers parochial interests. It is unpatriotic to whine now.
BobbyMax 12/4/2012 | 10:03:22 PM
re: Powell Peeves Competitive Carriers The ecesses brought about by the VCs that established a number opf useless and copycats broght down companies like Lucent and Nortel. This will affect innovation in the telecom industry.

Similarly lobbysts, politicians, corrupt investment bankes that created CLECs and other service providers have done tremendous harm to our telecom infrastructure.

Manipulation of stock pricesby wall street analysts and the CES have also been injurious to the telecom industry.

Misleading account practices and stock option corruption was long tolerated by SEC, Federal Government and stock holders. Recently companies like Enron, WorldCom, Adelphi, Tyco, Xerox, Arthur Anderson have come to light, but there are thousand of companies whose accounting practices and other forms of corruption has not been examined. Unfortunately a lot of these companies are located in California where most of the irregularties including stock option corruption occurs.
Light-bulb 12/4/2012 | 10:03:20 PM
re: Powell Peeves Competitive Carriers Lets be realistic! There is no way, that CLECs could all be succesful. We were designing rules just to try to make a valid Business case for CLECs. Their has been 100s of Billions of dollars wasted in supporting new CLECs that promised the future of networking. Look at Rythms for some evidence. They touted superior performance, superior cost points and how they were going to rule the world by providing cheap DSL, Over the ILEC lines... oops.
FCC imposed absolutely unfair competitive practice when they forced the RBOCs to give access to their network. While the RBOCs would give access they were VERY VERY slow in giving the access. Technical difficulties, bad circuits you name it they did it to delay turning up the service for said CLEC. Can you blame them? Why should they hustle to turn up service for these guys when they are not making money on it? Thats business.
Who knows what happens if we de-regulate completely, and it would be a shock, that could take a few years to understand. But if they the RBOCs still had to conform to certain guidelines why would it not work?
My advice to Powell... Stay strong LISTEN to the RBOCs they are the key to the communications of the Entire Country give them back their leverage and potential for profits and lets allow them to work on a nationwide infrastructure for broadband. Lets allow them Reason to advance the network based on a VALID business case.

You tell me... Was the country so bad in the Ma-Bell era? Was the country so bad after the split with the established competitors in respected regions? Was the country so bad that the 14 main competitors in the country were just not adequate, and we needed More competition!!!, Was .05 cents a minute so bad? Hell was .10 cents a minute so bad?
Its back to the Basics and only a true honest business plan will work. The CLECs that based their plan on free access or heavily discounted access to the RBOC networks WILL NOT make it. If a company wants to compete with an RBOC have them put infrastructure in the ground (or lease the millions of available Fiber Miles) to control. When new housing developments get built, lay fiber for those new homes. Start building a next-gen network... I anticipate this is where the whining starts... the business case won't justify it... Its too expensive... yadda yadda yadda. Don't you think that is the reality of the situation for the RBOCs? So please stop saying that they "Just are not doing enough" it takes time and money. Its back to the basics, and this stuff doesn't happen overnight. (Think Post bubble) Everyone these days expects action to happen instantly. Well it ain't going to happen, and people talking about government built networks just want to hear about saving their jobs now, but it isn't going to happen either. We are talking years, maybe even a Decade for the RBOCs to roll out national coverage for broadband. (In areas that are financially responsible) This is based on a premise of cheaper technologies. Fiber everywhere makes about as much sense as a Mall on every corner. Or perhaps a Gas station down every street. There is just not a need for it. (I've said that before)

So... RBOCs have my support. FCC, take the gloves off of the RBOCs. Let the real market dictate the competition! Government imposed Competition has NEVER worked! CLECs if you want to start competiting... Compete. The RBOCs having complete control of THEIR network should not stop you... Should it?


Cheerio,
huntseat 12/4/2012 | 10:03:17 PM
re: Powell Peeves Competitive Carriers Those who fear that RBOCs are monopolies don't understand that even a regulated free economy has strong long term corrective forces. Despite the fact that RBOCs currently seem to own the customers they have internal and external pressures. Their assets have multiyear tax depreciation schedules that will outlive their useful life cycle. Wireless voice and wireline data traffic is slowly cannibalizing the wireline voice traffic that is the mainstay of RBOCs' profit. Cable providers already have or soon will have their own infrastructure to compete in voice service. Finally, the RBOCs are carrying heavy debt loads. The RBOCs position is not so enviable. The CLECs have no incentive to build their own infrastructure. Let AT&T, Sprint etc. build their own access fiber. If Tauzin-Dingell were to pass soon, it would in itself comprise an economic stimulus package.
kd2000 12/4/2012 | 10:03:17 PM
re: Powell Peeves Competitive Carriers >of networking. Look at Rythms for some evidence. >They touted superior performance, superior cost >points and how they were going to rule the world >by providing cheap DSL, Over the ILEC lines... >oops.

Why not!

>service for said CLEC. Can you blame them? Why >should they hustle to turn up service for these >guys when they are not making money on it? Thats >business.

The problem is RBOC's they became greedy and fear set in, when they saw the pop in CLEC revenues
and stock prices. It's like you lease out a
space and open your shop, and it starts to do
extremely well. To the landlord it should not
matter, but if landlord becomes greed and starts to think may be I can do this too.. and starts giving problems shop owners.. It is going to hurt both of them, neither he or shop owner will make any money!! RBOC's are slow 9 to 5 people with
no incentives to their employees to work agressively like CLEC's. RBOC' should have stay'd
completely out of ISP business and should have
simply charge the CLEC's for using their lines,
just like how real state landlords do their
retail/commercial complexes..

papabear 12/4/2012 | 10:03:16 PM
re: Powell Peeves Competitive Carriers I agree that there were too many CLEC's for the business. I also agree they tried to grow too big, too fast.

You make it sound like the RBOC's were giving this access to the CLEC's for free. Besides the slow service, delaying tactics and bad circuits. They had to pay for floor space, power, grounds, access badge service, parking privileges, dumpster use, line access to the customer, DS1's, DS3's and OC's back to their POP sites, roof rights for radio antennas, etc., etc., etc.

How many times did the CLEC's have to get lawyers and go to court to get by the RBOC stumbling blocks. Of course during this time CLEC customer's were canceling orders. Also, the RBOC were building out their networks so they could compete with the new technology. Which they would never have put in if the CLEC's were never allowed. The RBOC's had no incentive to invest in CAPEX if they didn't have competition.

Now that the market is saturated and the CLEC's are going belly up, the RBOC's have stopped building because they are losing their competition. Why spend the money? The RBOC's probably made more money in the last 7 or 8 years than they did before CLEC's.

Now that they have their networks ready they want to get the laws changed so they can run the last surviving(barely) CLEC's out of business. Once they are gone they can set back for the next 20 years making money without enhancing technology.

They were happy to lease floor space to the CLEC's because they had empty floors collecting dust when they finally upgraded to digital switches.

I don't feel sorry for the CLEC's or the RBOC's they both made their Exec's rich. I feel sorry for all of the people that have been put out of work and lost their retirement funds because of all of their bulls**t. Didn't the government help Bell build their network? Maybe they should repossess it and sell to the highest bidder.

photonalley 12/4/2012 | 10:03:15 PM
re: Powell Peeves Competitive Carriers Can someone please explain to me what are "Unbundled Network Elements" and what is being unbundled?

Thanks

Photonalley
[email protected] 12/4/2012 | 10:03:14 PM
re: Powell Peeves Competitive Carriers The Bush administrtion favors concentration and monopolies are not a problem for them.
bitdropper 12/4/2012 | 10:03:08 PM
re: Powell Peeves Competitive Carriers "...You make it sound like the RBOC's were giving this access to the CLEC's for free. Besides the slow service, delaying tactics and bad circuits. They had to pay for floor space, power, grounds, access badge service, parking privileges, dumpster use, line access to the customer, DS1's, DS3's and OC's back to their POP sites, roof rights for radio antennas, etc., etc., etc.

How many times did the CLEC's have to get lawyers and go to court to get by the RBOC stumbling blocks. Of course during this time CLEC customer's were canceling orders. Also, the RBOC were building out their networks so they could compete with the new technology. Which they would never have put in if the CLEC's were never allowed. The RBOC's had no incentive to invest in CAPEX if they didn't have competition. ..."

--------------------------------------------------

I can't agree more papabear.

This points out the basic concept of a venture oriented business. If you don't take into account all of the possibilities for obstacles, and develop strategies for overcoming them, there's a good chance your business will not succeed. This *is* the market at work. The CLECs, despite their own interpretations of what "competition" meant, either failed to anticipate the tactics of the RBOCs, or failed to have enough resources in place to maintain control over their own destinies. As you said, that's business! I'd be a lot more disappointed in the leadership of the RBOCs if they'd just rolled over, and cleared a path for the CLECs to put them out of business.

That doesn't mean I'm against competition. I'm just against using the excuse of "unfair" competition when it's aimed at covering up the failure to anticipate business opportunities and problems. If you're trying to crack a market based on legal interpretations of access and co-operation, don't be surprised when legal procedings cost you a lot of time and money. I'd love to see CLECs survive, prosper, and put an RBOC or two out of business; but I'd prefer if they do it with well-thought-out business models and savvy execution.
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