Don’t believe ‘special access’ hype

A new coalition, NoChokePoints, has been formed to lobby Congress and the Federal Communications Commission to further regulate the prices that incumbent telephone companies (Regional Bell Operating Companies or Incumbent Local Exchange Carriers) can charge for special access services purchased by businesses and institutions. Special access circuits are dedicated, private lines. For example, Sprint purchases special access circuits to connect its cell towers to its backbone. According to a coalition spokeswoman, Huge companies like Verizon and AT&T control the broadband lines of almost every business in the United States. The virtually unchallenged, exclusive control of these lines costs businesses and consumers more than $10 billion annually and generates a profit margin of more than 100 percent for the controlling phone Read More ›

Unbundling doesn’t work

The Japanese government filed comments in response to a Notice of Inquiry the Federal Communications Commission issued as part of its effort to design a grand strategy for broadband (see this and this). Japan has been working on opening essential facilities for broadband services to encourage broadband development in a fair competition environment. In 1999, local loop unbundling was ensured (for dry copper and line-sharing), and in 2000, collocation rules were established and optical fiber network unbundling were ensured. These policies accelerated the spread of DSL services and led to the rapid start up of FTTH services. In 2009, we also introduced rules to ensure Next Generation Network (NGN) unbundling. We have enforced the promotion of competition to realize the Read More ›

Letting the government run your business

The FCC has big plans for a national broadband strategy, according to Acting FCC Chairman Michael J. Copps It is my intention that at our next full Commission meeting, on April 8, we will kick-off an open, participatory, public process with a far-reaching Notice of Inquiry to marshal the data and expertise we need to make sure we meet our legislatively-mandated date of one year for presenting Congress and the American people a national broadband strategy worthy of the name. * * * * And we will endeavor to ignore no sector of our national life. Stop to think about it for a moment. What doesn’t broadband impact as we look to the future of America? Not just the basic Read More ›

Wide of the mark

Wall Street Journal columnist Gordon Crovitz writes that In Japan, wireless technology works so well that teenagers draft novels on their cellphones. People in Hong Kong take it for granted that they can check their BlackBerrys from underground in the city’s subway cars. Even in France, consumers have more choices for broadband service than in the U.S.

 The Internet may have been developed in the U.S., but the country now ranks 15th in the world for broadband penetration. For those who do have access to broadband, the average speed is a crawl, moving bits at a speed roughly one-tenth that of top-ranked Japan. This means a movie that can be downloaded in a couple of seconds in Japan takes half Read More ›

Broadband lessons from Labour

The Senate version of the stimulus package (H.R. 1) winding its way through Congress would provide $9 billion in direct public subsidy for broadband network deployment subject to a “non-discrimination” requirement which, like the “open access” requirement in the House bill, could turn into onerous “network neutrality” regulation (see previous post). Meanwhile, Britain has outlined its digital transition plans in “Digital Britain – Interim Report.” It is interesting to compare the substantially more free-market direction Britain is taking with the silly approach our own Congress is considering. For one thing, Britain is going to let private investors finance network upgrades. The Government is not persuaded that there is a case now for widespread UK-wide public subsidy for Next Generation Network Read More ›

Market to the rescue

Maybe it is premature to conclude that the government is the only entity who can facilitate broadband deployment at this juncture. Seeking to raise $500 million in debt to meet coming maturities, Cablevision Systems Corp. ended up with $750 million as investors with a renewed appetite for more lucrative but riskier debt flocked to the offering, according to a person familiar with the situation. Here is the full story.

Broadband stimulus

The proposed “American Recovery and Reinvestment Act of 2009” unveiled yesterday by House Appropriations Chair Dave Obey (D-WI) includes $1.825 billion for Broadband Deployment Grants, another $1 billion for Wireless Deployment Grants (25% to provide voice service in unserved areas and 75% to provide “advanced wireless broadband service” in underserved areas. The bill also appropriates $2.825 billion for broadband loans, loan guarantees and grants in predominantly rural areas by the Rural Utilities Service of the Department of Agriculture. An explanatory report accompanying the bill notes that the Communications Workers of America estimate (using a Department of Commerce model) that each $5 billion investment in broadband would result in 100,000 new jobs. On the positive side, the loans, loan guarantees and Read More ›

Telecom collapse

Hawaiian Telcom has entered Chapter 11 bankruptcy (see this and this), FairPoint Communication’s CFO is under siege as the company looks for a new CEO and Qwest Communications is cutting another 1,200 jobs as it tells investors not to worry about massive debt repayment deadlines. Times are tough for a lot of people, of course. However, phone companies have a special problem: Basic phone service is not profitable. Regulators have matched prices with costs; and they have defined costs narrowly, so as to shift some costs, for accounting purposes, to services which are profitable. As a result, basic phone service has to be subsidized by overpriced calling features such as voice mail, Caller ID, etc.; Internet access; video or wireless Read More ›

Bracing for new regulation

Observers predict stepped-up regulatory battles in telecom, according to the Wall Street Journal, New congressional leaders as well as policy makers in the Obama administration are expected to press for fresh limits on media consolidation and require phone and cable firms to open their networks to Internet competitors, lobbyists and industry officials say. The article overlooks the fact that broadcast ownership limits and forced access policies are restraints on the free speech rights of broadcasters and network providers, and that the constitutionality of new regulation could ultimately be decided by the courts.

Regulation and investment?

Misguided regulatory policy is “among the most important inhibitors of capital investment in telecommunications,” conclude Debra J. Aron and Robert W. Crandall in a recent paper. The authors observe that Business firms do not make investments for altruistic reasons but rather make investments in order to earn a return on the invested capital. For any company to make any investment, it must determine, and convince the capital market, that the investment is reasonably likely to produce a positive return in net present value (NPV) terms sufficient to compensate for the risk incurred. When companies seek funding to execute a project, they compete for those funds with all other potential projects in the economy, not just with other investment opportunities available Read More ›