Telecommunications

The FCC received reply comments last week concerning the national broadband plan it is required — pursuant to the stimulus legislation — to deliver to Congress by Feb. 17, 2010. In the attached reply comments of my own, I conclude: The broadband market is delivering better services at lower prices. There is no evidence of a market failure which would justify additional regulation. I pointed out that just as the Sherman Act does not “give judges carte blanche to insist that a monopolist alter its way of doing business whenever some other approach might yield greater competition,” according to the Supreme Court, the Commission would be wise not to insist that broadband providers alter their way of doing business just Read More ›

The Department of Justice is looking into whether large U.S. telecommunications companies such as AT&T Inc. and Verizon Communications Inc. are abusing the market power they have amassed in recent years, according to the Wall Street Journal. One area that might be explored is whether big wireless carriers are hurting smaller rivals by locking up popular phones through exclusive agreements with handset makers. Lawmakers and regulators have raised questions about deals such as AT&T’s exclusive right to provide service for Apple Inc.’s iPhone in the U.S. The department also may review whether telecom carriers are unduly restricting the types of services other companies can offer on their networks, one person familiar with the situation said. Public-interest groups have complained when Read More ›

George S. Ford and Lawrence J. Spiwak at the Phoenix Center conclude in a new paper that government intervention is not warranted in the market for special access services purchased by businesses and institutions (which I discussed most recently here). They note that the rates of return a prominent study estimated AT&T, Qwest and Verizon are currently earning either are similar to or less than the rates of return these companies used to earn when the market was fully regulated. NRRI bases this analysis on ARMIS rates of return, a perplexing approach once one calculates ARMIS rates of return from the period in which all special access services were price regulated. In 1999, for example, the average rate of return Read More ›

Bret Swanson at Entropy Economics makes some fascinating findings in a new paper: We estimate that by the end of 2008, U.S. consumer bandwidth totaled almost 717 petabits per second. On a per capita basis, U.S. consumers now enjoy almost 2.4 megabits per second of communications power, compared to just over 28 kilobits per second in 2000. The ability of Americans to communicate and capitalize on all of the Internet’s proliferating applications and services is thus, on average, about 100 times greater than it was in 2000. It sort of makes you wonder why we need a National Broadband Plan from the government, particularly when you consider the possibility that the government’s well-intentioned efforts may backfire. Consider Swanson’s observation as Read More ›

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 ›

In North Carolina, the Utilities Commission Public Staff (an independent agency which represents consumers before the Utilities Commission) sent legislators an email objecting to legislation which would update the state’s antiquated telecommunications law. The email contained the following arguments: CURRENT LAW ALLOWS LOCAL EXCHANGE COMPANIES AMPLE FLEXIBILITY TO COMPETE WITH CABLE AND WIRELESS. UNDER THE PROPOSED LEGISLATION, THE COMMISSION WILL NO LONGER BE ABLE TO ENSURE THE AFFORDABILITY OF BASIC LOCAL SERVICE OR ADEQUACY OF SERVICE QUALITY, OR HANDLE COMPLAINTS FOR CONSUMERS ABOUT BILLING OR SERVICE. The first argument is misleading — although it is true there is some flexibility, it certainly isn’t adequate (let alone ample). The second argument is technically correct in some respects but is utterly beside Read More ›

In Alabama, HB 478 and SB 373 would protect competitive telecommunications, voice over Internet, cellphone and broadband services from utility regulation. Competition drives innovation which benefits consumers, as we have seen so often in telecommunications beginning in the 1980’s and 90’s–when small steps towards free and open competition enabled new services and features. For example, long distance service used to be fairly expensive. Long distance prices have come down dramatically. They have come down to the point that for many consumers–consumers whose phone service is not subject to regulation by the state Public Service Commission–long distance is a bundled service with unlimited use. Cellphone service–again not subject to PSC regulation–used to cost 47 cents per minute. Now, with many providers Read More ›

The Miami Herald worries that phone bills will rise in Florida if legislators reduce the Public Service Commission’s authority to regulate land-line phones with “extras” like call-waiting, or caller ID (basic land-line phone service only — with no extras — would remain regulated by the PSC). … Under current rules, phone companies are limited to annual rate hikes pegged at 1 percent above inflation for basic service. The bills would allow rate hikes to max out at 20 percent on a single day’s notice. In fact, the 20 percent cap has been on the books since 1995 (Fla. Stat. §364.051(5)(a)). Florida has one of the nation’s most antiquated statutes for regulating phone services. All of Florida’s neighboring states in the Read More ›

Government subsidies typically result in waste, fraud and abuse. A recent audit of Georgia’s Universal Access Fund contained the hardly surprising findings that one or more small rural telephone companies were reimbursed for a $15,000 dinner, a $20,000 Christmas party, a new roof and the housekeeping expenses for a cabin in North Carolina and other questionable expenses. Remarkably, the Georgia Universal Access Fund distributed $1.7 million in 2003 to five companies and $10.2 million last year to 15 rural phone companies. Georgia legislators were quick to react. In the House of Representatives, a bill (HB 168) which would terminate the fund passed by a vote of 124-41. The bill is awaiting its fate in the state senate. The legislature is Read More ›

George Gilder and I have completed a study of legacy telecommunications regulation in Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina and Tennessee. We have previously examined the same types of outdated regulation in Illinois, Indiana, Ohio, Michigan and Wisconsin. In this paper, we update our previous analysis and shift our focus to a different region with its own unique legacy. The traditional rationale for utility regulation — i.e., that fixed landline telephone service is a natural monopoly — is gone. Lawmakers must face the reality that continued reliance on utility regulation is not only unnecessary but will harm consumers by distorting competition. A survey of the Southeastern states indicates that significant and harmful vestiges of legacy regulation Read More ›