Shut down the FCC? Heck, no, you say

Arguments are to be avoided. They are always vulgar and often convincing.Oscar Wilde

Dear Vorticians,

Wow!  You guys really let me have it.

In last week’s missive, I argued the time may be ripe to sunset the FCC. Shut it down, close it and let telecom take its ‘natural’ course. I asked for your thoughts on the matter of deregulating the network industry and, by probably a three-to-one margin, you blasted the idea. (By the by, you can still share your thoughts with me – actually, I encourage it – at jgallant@vortex.net .)

The points you raised fell into the following general buckets:

1. Johnny boy, get real: The FCC handles a lot of important matters beyond telecom, such as oversight of the broadcast industry and radio spectrum, so it’s short-sighted to talk about shuttering the place.

2. Hey, pal: Don’t confuse lack of leadership or clear policy at the agency with a need for the FCC. We need the FCC to implement a cohesive national telecom policy, we’re just not getting that today.

3. Vortician John, are you serious? If you want to deregulate the industry, you have to knock down the state public utilities commissions, which have just as much – maybe more – influence over what happens in networking.

4. Are you nuts? It wasn’t the FCC that created the Internet bubble or buried too much fiber in the ground or over-invested in all those competitive local exchange carriers. Don’t blame the FCC for creating the mess that your vaunted free market created on its own.

I’ll offer up one sample of the reactions here and continue to share our little community’s views in upcoming Digests. For the record, I’ll be off next week so don’t be looking for your newsletter during the lull in your office action.

The following note was received under the subject line: “Shut the FCC: Are you nuts?” It’s from Vortician Eric Artman and it goes a little something like this:

“The FCC, aside from its broadcast and spectrum management assignments, still has a vital role in telecom – though the current membership seems not to want to fulfill it. 

“In brief, Alfred Kahn summed it up when he said: ‘Deregulation does not mean that you fire the policeman,’ meaning that antitrust principles still need enforcement.

“The FCC is currently the chief intermediary between incumbent LECs (SBC, Verizon, BellSouth, and Qwest) and the competitive carriers (including the Big 3 Long Distance carriers and a host of CLECs, BLECs, DLECs, second-tier IXCs and others).

“As territorial monopolists for the loop plant (the part connecting the customer to the first switching point), the ILECs have tremendous market power. They control who reaches ‘their’ customers and how. The three biggest would love to each merge with one of the big IXCs (USWest/Qwest has already happened) and then each ILEC would have its own sandbox in which it could extract monopoly profits from all but the very largest customers without meaningful competition. (Face it: the only reason we have any competition at all is that laws and FCC regulations require the ILECs to interconnect with other carriers. But for those requirements, all local competition and most long-distance competition would simply die on the vine.)

“Aside from the ILECs, who else is clamoring for total ILEC deregulation? Wall Street? As a whole, the Street seems to want ILECs returned to virtual monopoly status, presumably so they once again have a ‘safe’ recommendation for their clients. A bigger bunch of lazy, chicken-hearted, risk-averse analysts I never met. God forbid that these ‘thinkers’ in cushy jobs should have to really understand and analyze the industry they follow. Better for them that they should have the easy ‘invest-in-the-monopoly’ advice right at hand.

“Look at the airline industry. The benefits of competition abound, primarily in low prices because that’s what customers want – though fully reclining seats in first class are also a response to a competitive market. Analysts following airlines work very hard and still are often wrong, as is common in a free market. Wall Street’s telecom bunch fears this life.

“What’s that you say? We got rid of the Civil Aeronautics Board, we should follow with the FCC? Wrong. Getting rid of the CAB wouldn’t have worked if each major city were served by only one airline, which not only owned the planes but also owned the local airport and all parking spaces within 10 miles of the airport. That’s the situation in telecom. Sure, you could park 11 miles away and take a shuttle in to catch the one non-incumbent flight each day that your local incumbent airline allows. Just like you could string your own pair of wires from your home to the AT&T switching center four miles away. But who wants to, really?

“Get a grip and look seriously at the situation, rather than just listening to a bunch of whiners who floated to the top of the monopoly ILEC heap and are now unhappy that competition is hard. (Note that both cream and scum rise to the top….)”

Well, I asked for it – reaction that is.

Actually, Vortician Artman’s response was indicative of the depth of feeling on this topic. I look forward to responding to the response and sharing more of your thoughts in two weeks. Please send me more at jgallant@vortex.net.

Bye for now.