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The Five Stooges

Column
Column
Column
2/21/2003

Funny how everybody thought the FCC might do something useful, isn't it?

Instead, in moves aptly described by Chairman Michael Powell as "Picasso-esque," the beltway bureaucrats yesterday concocted a masterpiece of conflicting policy that had small-time public utility lawyers across the 50 states throwing their caps in the air.

In a political twist, Commissioner Kevin Martin had worked behind the scenes to form a secret cabal of confused commissioners that would undermine Chairman Powell's agenda. Curley sided with Moe, but then cut a side deal with Larry. Can you say: "back-stabber"?

Powell lost control. What is it with the Powells these days? Have they lost their touch?

Get this: The two minority Democratic Commissioners, Michael Copps and Jonathan Adelstein, voted with Martin to defeat Powell's desired deregulation of UNE-P. But Martin swung to the other side for the broadband vote, siding with Republicans Powell and Kathleen Abernathy.

In short, Martin was the swing vote, and he swung both ways.


"Three more years of litigation!" cheered the lawyers. "More attorney's fees!"

It was a solution that would make any lifetime lobbyist or public utility commissioner cry with joy.

But what about those other folks? You know, like... consumers, engineers, and investors.

Well, I think, like me, they're scratching their heads. You could waste your time wading through pages and pages of pipe-smoking analysis on the pages of the New York Times or the Wall Street Journal. Or perhaps you might read Light Reading's more brief and cogent analysis: Powell Loses FCC Vote. You could also whip out your credit card (Shazam!) and purchase a single report or subscription to Optical Oracle, which just weeks ago deconstructed why politics would defuse the efficacy of the standing FCC in 2003. (If you did that, of course you would also get profiles of the commissioners and relevant industry market data, all for just $400 [single report] or $1,250 [a full year's subscription] – end of commercial message).

But, even armed with all this data and analysis, you're still likely to come to only one sensible conclusion: The FCC hasn't got a clue.

Here's why: It's all about competition, isn't it? The FCC simply hasn't concluded whether it wants to encourage – or discourage – competition. In fact, in their peculiarly schizophrenic approach, they appeared to continue regulating on part of the network but freeing up other parts. Here's the low-down of how these rules effect competition in our modern communications network:

  • The new FCC laws changed virtually nothing on the UNE-P front, but it does unbundle switching from business markets. So, in a sense, competition still exists on the switched phone front. Consmers will continue have more options. RBOCs will continue to belly-ache.

  • On the broadband front, the FCC deregulated broadband over the local loop, allowing the RBOCs more control over their broadband services on their own networks. But this has little meaning, because the real competition for RBOCs in broadband is not coming from sharing their own copper wiring – it's coming from multiple systems operators (MSOs) using entirely different systems, such as cable networks.

  • The FCC cleared the way for new investors to build and own monopolized fiber to the home (FTTH) networks. But nobody has the cojones or money to do this anyway.

    In the end, it was milquetoast policy from a split board of bureaucrats.

    What this market really needs is something more radical. Anything, really. I still hold that things would really move forward if the local loop were entirely set free. There are several ways to do this, but one I've proposed before involves some sort of mass buyout (see Hawkish on Telecom). The government could buy it, compensate the RBOCs, and spin it back out as a privatized collective.

    It's not such a crazy idea. People forget that this happened once before. It was called the "Internet." Perhaps you've heard of it.

    That would be cool. It would come with a nice catch phrase: "Free the Loop!" A freed-up and reinvigorated local loop would spur an entirely new revolution in communications and another IPO boom. Yes, the RBOC lobbyists will never let this happen. It's a shame. In the end, what's more important, the advance of the network or what Ed Whitacre thinks?

    If you have ideas on whether this can or can't happen, or variations of the approach that are more tenable, please write me at [email protected].

    The other alternative: for all the lazy, timid millionaire/billionaire investors and VCs to get off their duffs and get back and finish building the new fiber networks that fall under the FCC's new un-regulated guildelines.

    Now, that's a crazy idea!

    — R. Scott Raynovich, US Editor, Light Reading Editor’s note: Light Reading is not affiliated with Oracle Corporation
    (nor with Orkle.Org)

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    Page 1 / 5   >   >>
    Scott Raynovich
    Scott Raynovich
    12/5/2012 | 12:35:46 AM
    re: The Five Stooges
    Hmmm I guess ex-Corvis Steve is bigger news than the FCC.
    10Gig
    10Gig
    12/5/2012 | 12:35:43 AM
    re: The Five Stooges
    i can see the next article coming.

    someone in XYZ corporation getting severely warned for pornography popup ads in the network system.

    Great show!!
    soldin99justwatchnow
    soldin99justwatchnow
    12/5/2012 | 12:35:43 AM
    re: The Five Stooges
    no we are just waiting for Lightreadings analysis of Micheal Jackson's 2 hr documentary last night.
    sevenbrooks
    sevenbrooks
    12/5/2012 | 12:35:42 AM
    re: The Five Stooges

    This is about the fifth time that I have seen this. I have seen no rational plan for how this would work, but let me ask some questions.

    1 - Would this mean purchase of RBOC lines only or would IOC lines be purchased as well?

    2 - Is there some belief that there is a standard for what is deployed and how it would be modernized?

    3 - Is it clear that the modernization of the outside plant would be executed crisply by the politcal machine that is the US Government?

    4 - Would all the tariffed services that are MANDATORY to be offered (example 4-wire leased line analog) continue to be offered? If not would the Federal government pay enterprises and consumers to upgrade their equipment attached to these facilities?

    5 - Given that a single technology will be chosen for the modernization (we wouldn't tax fund two would we?), will the government compensate existing vendors that it puts out of business by fiat?

    6 - Can the government decide and closely regulate the services that you wish to purchase? What if you want to buy other services, how are they created and paid for?

    7 - Given that this is the Government owned local loop can we Americans tolerate Alcatel, Siemens, Nortel, and Marconi providing products to it? Or will this environment go back to Lucent only (the way the Europeans run their networks)?

    So, go ahead and buy the local loop and then let the fireworks begin. My suggestion is that some of this be worked out prior to purchasing the local loop.

    seven
    lorent
    lorent
    12/5/2012 | 12:35:14 AM
    re: The Five Stooges
    I think it's because at least we can figure out what the deal was with Steve. Its a clear cut issue.

    Unfortunately its not clear what the FCC ruling ramifications are going to be. It kinda like the free trade agreement. Its going to take years to figure out whether this one out...
    rjmcmahon
    rjmcmahon
    12/5/2012 | 12:35:12 AM
    re: The Five Stooges
    Buying the Cu loop is a waste of time and money. Taking it away from the inefficient RBOCs (and their lobbyists) should be the primary goal there. Think of it as local loop, Cu, condemnation.

    Most people don't believe we can afford a new fiber last mile. (But too many don't believe in themselves either, so we can't affort to wait for their conversion).

    We can afford our new infrastructure. All that we need to look is our utility history. Previous generations were able to build so many roads and light the continents of the planet, so we surely can find a way to lay the strands of democratic fiber.

    The question then becomes, who can do it? Can the VCs do it even with their Wall St. connections? Can Bill Gates or Warren Buffet? (Probably not, not to mention Paul Allen has squandered too much on one-way wired world anyway.)

    The only folks who can afford it are more powerful than that. They are us, the collective. Which means our representatives must get involved.

    The FCC id being used as an office to raise money (via spectrum auctions) and for political career building. They do not help much. They are blind in their beliefs. They do not see that a market cannot be establish by the lobbyistss status quo solutions. (Think of it like asking communist Russia to embrace glasnost. It is no small task.)

    Local market creation is the first step. There are many lessons from energy, and its deregulation, of which we can leverage. First, the public utility districts (PUDs) seem to be the only ones who weathered the deregulation storm. How did they do it? Why do they respond to public complaints much better than IOUs? The lesson in my mind - monopoly infrastructure works best when it is run by people who value a commitment to serve as their highest priority. IOUs tends to prioritize shareholders whose primary care is to aggregate wealth. (Look at CA's energy rates for an example of complete IOU failure.)

    The next obvious question is, what motivates people to pay for the infrastructure improvments, particulary when almost every government office is facing massive budget deficits which implies they were living off bubble money like everybody else? I'll suggest we look to our roads for that answer.

    A user tax needs to be implemented. I'll suggest that it be on consumables. Most importantly, that tax cannot be diverted to pork projects. And those receiving it must be held accountable to deploying our fiber miles. It's also worth noting that fiber will improve the asset value of our buildings and our homes. We'll need to find a way to liquify that.

    I'll stop here as this post is too long already and my family wants eat dinner together.
    Scott Raynovich
    Scott Raynovich
    12/5/2012 | 12:35:07 AM
    re: The Five Stooges
    What may be considered "a waste of money" still happens to provide the bulk of revenues on an industry that accounts for 4% of the GDP.

    The bottom line is that the roadblock to the current industry IS the current copper infrastructure. New fiber is not being built BECAUSE the copper and RBOCs exist. There is no investment upside to fiber overbuild. Now, if the government takes that out of the equation -- buys copper and then allows anybody service provider to use it, it would open up the opportunity for upgrades.
    Scott Raynovich
    Scott Raynovich
    12/5/2012 | 12:35:07 AM
    re: The Five Stooges
    Sevenbrooks: I am by no means an expert in the complexities of telecom regulation, but let me take a stab at your questions:

    >1 - Would this mean purchase of RBOC lines only >or would IOC lines be purchased as well?

    EVERYTHING. IOCs are subsidized anyway.

    2 - Is there some belief that there is a standard for what is deployed and how it would be modernized?

    STANDARD CREATED BY MARKET OF INDEPENDENT CONTRACTORS & PRIVATE ISPs

    3 - Is it clear that the modernization of the outside plant would be executed crisply by the politcal machine that is the US Government?

    OUTSOURCE TO INDEPENDENT OPERATORS BY PUBLIC BID

    4 - Would all the tariffed services that are MANDATORY to be offered (example 4-wire leased line analog) continue to be offered? If not would the Federal government pay enterprises and consumers to upgrade their equipment attached to these facilities?

    TAX BREKS FOR OPTICS

    5 - Given that a single technology will be chosen for the modernization (we wouldn't tax fund two would we?), will the government compensate existing vendors that it puts out of business by fiat?

    GOVERNMENT DOESN'T HAVE TO PICK A STANDARD FOR DOING IT. THE INDEPENDENT CONTRACTORS WOULD

    6 - Can the government decide and closely regulate the services that you wish to purchase? What if you want to buy other services, how are they created and paid for?

    GOVERNMENT IS PAYING FOR THE ACCESS, NOT THE SERVICES. INDEPENDENT SERVICE PROVIDERS OPERATE OVER THE GOVERNMENT-PROVIDED ACCESS NET. Again, the model is the Internet. Public infrastrucutre with private service providers.

    7 - Given that this is the Government owned local loop can we Americans tolerate Alcatel, Siemens, Nortel, and Marconi providing products to it? Or will this environment go back to Lucent only (the way the Europeans run their networks)?

    SURE, WHY NOT?
    sevenbrooks
    sevenbrooks
    12/5/2012 | 12:35:06 AM
    re: The Five Stooges

    Scott,

    I can't imagine how what you would propose would work. Suppose Cisco bought some lines. Could they tell everyone that IP phones were mandatory? Or does the current regulatory paradigm stay in place.

    Rjmcmahon,

    The capability already exists to do what you want. I did note that you want people to pay taxes to do this. The creation of these small markets without competition will lead to very high prices. These might not be direct billed, but subsidized with taxes. I am amazed that you want senior citizens and the poor to pay for your broadband.

    seven
    Scott Raynovich
    Scott Raynovich
    12/5/2012 | 12:35:04 AM
    re: The Five Stooges
    Sevenbrooks, I don't exactly understand what you mean by "buying the lines." They're open -- to anybody. Open, like the Internet.

    At any rate, my idea is only just a concept, with many obvious flaws. But let me try to flesh out the idea a little further:

    The idea is to replicate the Internet model, in which a core backbones structure is open for any and all manner of private service providers to use. The idea is not "socialist infrastructure," but "a private-enterprise supported collective." For those that are going to argue -- there is a difference. The Internet: private-enterprise supported collective. US Interstate highway system: socialized infrastructure.

    Of course, with existing telecom systems, this is more complicated, because rather than being built from scratch, like the Internet, an established, bureacratic infrastrucutre already exists. But if you think about it, the RBOCs already are socialized: They are heavily regulated to the point at which the government meters their revenues; they have enormaous debt,like government entities; and organic and innovation is discourage by a large, established bureaucracy. In essence, the RBOCs are mini-governments within themselves. Why not just buy them out?

    Once a public infrastrucutre is established, private service providers are brought in to actually run the services (equipment co-location, marketing e.t.c.). The government maintains the last mile.
    Page 1 / 5   >   >>
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