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More on the FCC and Deregulation

August 3, 2005

The word on the street (the Wall Street Journal, actually) is that the FCC, headed by Chairman Kevin Martin, will seek to change the rules regarding how legacy phone companies' Internet services are regulated.� The changes could come as early as tomorrow.

Specifically,�Martin believes that�the FCC's highest priority regarding broadband�is to spur competition and investment by placing�DSL providers�and cable providers on a level regulatory playing field.�

"[W]e should place all broadband providers on equal footing so that they can fairly compete in the marketplace - not in front of regulators," Martin said at the conference.� "They will have the incentives to invest the capital necessary to make 21st century broadband capabilities available to all American consumers."

We can thank Brand X for this.� Indeed, the Supreme Court in June upheld the FCC's rule that cable companies are not required to share their broadband lines with competitors.� Once the decision was announced, ILECs, ignoring their 100-year-old common carrier status, started to scream bloody murder that they, too, should not be required to share their lines with competitors.

Martin, a champion of�intermodal competition (provided that there are only two models), agreed.� The thought is that�large telcos will invest more in their DSL networks if they do not have to share with nasty ISPs such as AOL and Earthlink.��In Martin's world,�competition�increases when competitors are eliminated.� Hey, ISPs, cheer up!� If Martin has his way, you can still compete for dial-up�and wireless Internet access.�

Anyway, Martin claims that�consumers will guide the market with the plethora of choices�available for�broadband Internet access.� Nevermind if�broadband services haven't been deployed in your community.���

According to an October 2004 report entitled "Expanding the Digital Divide and Falling Behind on Broadband"�there are two major�problems with deregulation: first, prices will not decrease, nor will the ILEC/cable duopoly spur innovation.� Don't believe me?� Let's focus on the cable industry for a moment.� The last time cable faced any sort of "competition" was when satellite providers such as DirecTV rolled out video services about 10 years ago.� Remember that?� Have you noticed a decrease in your cable bill recently?� Indeed, the cable industry will react the way it always has: by doing nothing.� You can't blame it, really.� After all,�cable modems garner the lion's share of the broadband access market.

Second,�by�pushing for�deregulation, the FCC is shifting its policy�of regulated universal service to a market-driven approach.� This approach is unprecedented.� Wholesale policy changes should be analyzed and re-analyzed, particularly where the future of the U.S. economy is at stake.




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