The Bells, The Bells, Only The Bells

"Where's the competition?" asks James Glassman of Tech Central Station. Almost five years after the Telecommunications Act of 1996, which was supposed to open up competition for the "last mile," megacorporations like Verizon and SBC still have a stranglehold and their would-be competition is gasping for air. What went wrong in the local loop? And what's to come?

Comments

Irrelevant

[Kiss the Blade]

The landline companies are unimportant. They have to compete with wireless, mobiles, satellite etc etc

The simple fact is that landlines won't exist in twenty years at all. Nowadays mobility is the key; landlines are clearly archaic. My generation her in Britain doesn't use land-lines at all - everyone has a mobile. They are cheaper and offer higher quality. When 3G liscences arrive, the competition will be annihilated.

I predict that companies such as Vodafone and Erikkson will control the infosphere in the future. They are the ones we should be watching, not 20th century corps like Verizon.

KTB:Lover, Poet, Artiste, Aesthete, Programmer.

Cherrypicking, as usual

[squiggleslash]

Britain deregulated telecoms in the mid-eighties (all telecoms, not just long distance), at first trying to get competition by promoting a second competitor and giving that competitor advantages (Mercury), and in the early nineties, when that clearly wasn't working, opening everything up and encouraging participation by the cable companies.

What happened? Cherry picking. The cost of putting together even a new long distance network, let alone a local network which - even given access to an existing local loop - is a complex and expensive proposition to get involved in, is astronomical. Competitors, with the exception of the cable companies, exclusively targetted big businesses and left the consumer market to token long distance services and that was it.

The assumption the US legislature made was that all telephone companies will try to serve the whole market, or see all parts of the market as having the potential for dramatic profits. That assumption, frankly, is a load of tosh.

AT&T got a monopoly in the early part of the 20th century because of a recognition on both sides that providing universal service was only an advantage to a telephone company if it owned the entire market. AT&T accepted regulation as the price for this. But while "universal service" is useful to a competitive telephone company, it is a burden to provide, and nobody wants to do it. As a result, competitive telecoms is focussed pretty much exclusively on the bodies that pay the most, ignoring the residential and small business markets.

Legislators made the mistake of thinking that the only barrier to entry in the residential market was the absense of an open local loop. But this was untrue even in 1996 - cable companies have always had the capability to operate telephone networks over their loops, and many American cable companies have experience from running exactly those types of system in the UK.

William Kennard, FCC chair, once introduced Britain's OFTEL boss of the time as proving competitive, deregulated, telecoms could work. OFTEL, of course, prove no such thing, and most of the move forward to de-regulated telephony has been the result of ideological bunk, rather than because anyone has a clear, sensible, way of making it work.

How do you fix it? There are several options. You could forget the crap and go back to heavy regulation. You could, on the other hand, remove the local loop from the telephone companies. This forces the creation of a market for the telephone companies to serve. Whether this is enough to encourage telephone companies to dip their toes in the water of residential telephony is open to question, but it's a better situation than what we have now.

What you don't do is just assume that competition will automatically develop if you "open" a market. Competition will only ever appear in markets where there is a great deal of money to be made, and the residential telephony business is not where that's at.
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