Endangered silos?

It will not be easy for the FCC to do what would help most. That is, to get out of the way and let the revolution created by new technologies that render traditional telecom companies endangered species run its course.

Historically, the pillars of telecommunications regulation around the world have been:

• Raise money for the government.

• Protect incumbent carriers.

• Raise money for the government.

• Maximize response time to technological change.

• Protect incumbent carriers.

• Regulate based on transport not services.

• Raise money for the government.

Basing telecom regulations on these pillars has worked – according to one definition of “worked” – for a long time. But, at least at the Federal Communications Commission, things might – just might – be on the verge of changing. It will take some time yet to know whether any change actually will be for the better.

A quick glance at your phone bill will verify the revenue-generating imperative under which the telephone regulators have worked and show how well they have carried out that imperative. A quick glance at the coverage maps of the major regional telephone companies will show how well the regulators have protected the incumbent carriers. A quick glance at the phone on your desk will show how well this combination has protected us from innovation.

Over many years the regulators have built very impressive accretions of facility-based regulations. There are separate regulatory regimes for each legacy type of service: fixed-wire telephone, wireless telephone, cable TV and satellite. Regulators steadfastly have insisted that this division makes sense in spite of the last 10 years of service convergence. Somehow telephone services over twisted-pair copper wire, coax cable, cellular radio, satellites or over IP over any of the above were different things and needed to be regulated on their own.

The divisions in the real world have been getting far less clear for a number of years and, with so much convergence of services over IP, any facility-based differentiations are almost entirely in the minds of the regulators and incumbent carriers.

But some glimmers of understanding might be coming from the FCC. Commissioner Kathleen Abernathy, in remarks prepared for delivery at a recent telecom forum, asked the Commission to move away from what she calls “old regulatory silos.” She advocated moving toward regulations based on the “functional nature of the services being offered rather than the legacy category that the provider happened to belong to.” She also pointed out that the FCC recently asked for public comment on any rule change that would serve the public interest and implied changes might even be made.

But it will not be easy for the FCC to do what would help most. That is, to get out of the way and let the revolution created by new technologies that render traditional telecom companies endangered species run its course. Do not try to protect the remainders of the Bell system with regulations. I don’t hold out much hope for this to happen soon. Even someone as forward-looking as Abernathy seems to be missing a basic problem when she says that one of her top priorities is to ensure the FCC remains relevant as the world changes. Preservation of regulators or incumbent carriers should not be a design goal – an innovative telecom industry should be.

Disclaimer: Silo protection used to be a goal at Harvard. That might be changing, but the above is my evaluation.