Playing the devil’s advocate

A lot has been written over the last couple of weeks regarding the recent FCC Triennial Review and how it bodes for the further demise of the competitive marketplace and the increase of creative service offers from the incumbents. We refuse to believe that we can enter a time machine and go back to the 1980s’ world of telecommunications.

A lot has been written over the last couple of weeks regarding the recent FCC Triennial Review and how it bodes for the further demise of the competitive marketplace and the increase of creative service offers from the incumbents. We refuse to believe that we can enter a time machine and go back to the 1980s’ world of telecommunications. That world would be defined as follows:

1) A small number of players owning the marketplace (ILECs, IXCs).IXCs).

2) Very little competitive choice for consumers (ILECs, 

3) New services only offered after much review and finally a launch under duress.

4) Price points looking like a monopolistic market.

There are a lot of reasons why this might happen, but we hope for many reasons that it won’t.

Market Consolidation

Has the market continued to consolidate? Yes. Will the market continue to consolidate? Probably yes. This isn’t necessarily a bad thing: it will be for those who end up without gainful employment, but when reviewed in terms of capacity this consolidation might hold a silver lining. It’s not a new story that the industry still has too much backbone capacity available across the remaining players. Although many supporters of the FCC rulings have argued that without the need for resale at a reduced rate the incumbents will deploy additional capacity, there are reasons why this will not happen without further consolidation.

The hope is that as competitors raise their rates to support enhancement of their networks or resale of higher priced loops, the end users will flock back to the incumbents giving them the need to deploy additional capacity and return the core equipment vendors to the fat and happy days of the past. In order for this happen, there still needs to be services offered by the incumbents that end users want to buy at price points they will accept.

Market consolidation alone will not cause mass market America to run out and buy broadband services they don’t think they need at a price point they feel is too expensive. So will there be fewer players? Yes. Is this necessarily a bad thing? No. Does it mean we go back to monopolistic players being the only players in town? We don’t believe so. And will it increase broadband adoption and carrier spending? We don’t believe so either.

Lack of Competitive Choices

We’ve come too far in this vein to go all the way back to the beginning. We have ILECs, IXCs, CLECs, wireless providers, ISPs, cable providers, satellite providers and more providers yet to be created. As mentioned in the previous section, will there be less than there are today? Yes. But to assume a customer will only have their ILEC to choose from is a bad assumption. Each of the service providers listed offers a service not easily replicated by the others. Cable providers primarily own the delivery of entertainment content. Wireless providers own mobility and ILECs still own the copper connection to one’s business or residence location. Although other competitors can partially replicate services offered by others, there isn’t a one-to-one replication. And customers will still require the same functionality they do today.

New Services Everywhere and Reduced Price Points

NOT. The ability to not have to resell discounted functionality to competitors will not expedite new service deployment. Without competitors new services will roll out more slowly. Without investment in new services, profit can increase, making investors happy. Anyone who thinks the elimination of the resale arrangement will cause new services to flood the market has never worked in a regulated telco. Competition and customer demand drive new services.

If your competitors go away and your customers aren’t demanding new services, why would you lower your price? You got me.

So what does all this mean?

The time machine is out back with its motor running. But we really hope service providers won’t climb aboard. Some reasons to make the outcome of the Triennial Review positive and not indifferent:

•  Consumers will buy new products if you launch products they need at reasonable price points. Consumers need education – you can create a market for new services. New services equal new revenue when launched at the correct price point with the correct groundwork upfront.

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Prove us wrong! Show us the telcos really don’t long for the “easy” times of the 1980s. Right now we don’t see a lot of actions out of the ruling that will help the consumer – just ones to make the consumer remain indifferent.