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Open Letter to FCC Chairman Powell
Adina Levin writes "An open letter to FCC chairman Michael Powell signed by internet and tech industry pioneers explains why the government shouldn't prop up the ailing telecom behemoths. Telecom companies bought expensive network technology with long bonds. That technology has been made obsolete by gear getting faster and cheaper all the time by Moore's law and Metcalfe's law. The telecom companies are asking for the equivalent of a bailout for their investments in sailing ships after the advent of steam. The way to speed the deployment of broadband to homes isn't to prop up businesses based on old technology, but to let uncompetitive businesses 'fail fast', and let new competitors play."
This is where the government bailout would help, by allowing access to areas that would be under-served, and allow time for solutions to that problem.
Jeez, pretty hefty rant this early on a Tuesday. Must be fear of sniper-related traffic in DC.
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IANAE, but what happens when major telcos start to go under? As they struggle to maintain profit margins, how despirate will they get? Can replacement technologies and companies absorb the workforce that will be laid off? How often will this type of thing happen? Think about it, the current plain old telephone system is no good unless it is ubiquitous. That's why the telcos are in trouble. They needed to put entire systems in place before they where useful. Fiber is fantastic except when it comes down to two little wires in the last mile. In for a penny, in for a pound. Telecommunications systems need to be complete or not at all. How do we get the technoloy in place before it's obsolete?
It seems to me that the long term goal of replacing outdated infrastructure and ancient business models may be reached sooner by this "fail fast" proposal, but the chaos produced would be devastating to customers. Service outages, price fluctuations, and provider changes could cripple customers large and small. The industry that might come out of such a proposal may be worse off for the experience.
-- Minds are like parachutes... they work best when open.
The recent spate of government bailouts (airline, steel, etc.) reminds me of the S&L scandal in the 80's. I believe Japan had a similar problem as well. Instead of letting some 'creative destruction' take place, as our govt. did, the Japanese bailed the incompetent banks out.
Result: their economy has been stagnant for a decade.
Let's hope the govt. has learned from their mistakes.
If you look at all the telcos of various types, it is the incumbents (RBOCs, Baby Bells, ILECs, PTTs...) who are surviving quite well and even prospering. They didn't get sucked into the IP-based boom/bust as much as others, and more importantly their legacy phone switches make significant money through well-established per-minute billing. Wireless operators who charge per-minute are also doing OK, although 3G will probably kill some of them off.
It's precisely the next-gen telcos (CLECs, ISPs, xSPs) who invested in the new IP technology that ran into the boom/bust and are struggling or going bust. WorldCom is something of a special case - it had a lot of legacy technology that should have tided it over, but the accounting shenanigans were too much to survive.
This doesn't mean that IP-based networks are a passing fad, though - all that's happened is that the pioneers have gone through the normal bleeding-edge live/die cycle. Some of them have made it, some have gone bust, and all the old-line telcos have adopted the same technologies.
I agree that failing telcos should normally not be propped up - as long as someone can step in to maintain services by buying up their assets, particularly local loops that are hard to recreate, the customer shouldn't notice that much interruption. My problem is with the analysis that the legacy technology is why telcos are going bust.
Why are the Bells forced to lease out their DSL connectivity to other companies at below cost? Does this really spur investment? The reason that most people do not have access to DSL is that the Bells will NOT invest until they are allowed to compete against cable companies DIRECTLY
Do cable companies have to let the telcos use their cable at below cost?
What will happen to the parasites (CLECs) when the hosts (Bells) die?
Deregulate the Bells and let true competition take hold. You will not regret it, Mr. Powell
But economics, psychologists and other liberal arts types realize that human beings defy "nature" all the time. People who study economics essentially study the cases where economics don't work! Psychologists study why people are not rational/utility maximizers.
As far as the broadband/telecom connection goes, did anyone else read this article in Business Week?
It talks about how broadband providers are keeping prices artificially high because they would rather deal with slower adoption rates at higher margins than faster adoption at lower margins because THEY KNOW EVERYONE WILL ADOPT BROADBAND EVENTUALLY and they can force us to pay more. Cable broadband profit margins are about 50 percent now.
Makes you realize how much companies like Comcast can prevent high-speed adoption and screw over the telecoms in the process.
(I canceled my Comcast modem and television service last week. Originally, I just wanted to get rid of the television service, but they told me that if I did, they were going to jack up my cable modem price by $15. I told them to cancel everything.)
You have people running big bussiness and people in the federal government. They're all friends. They went to Yale and Harvard and Princeton together... they drank at the same clubs. Their parents were friends, and their kids are going to Taft and Dalton and Exeter together right now.
Their goal? Simple. Take tax money out of the government, and get it into their pockets.
Back in the Reagan days, their favorite was the defense industry. It was perfect; there's relative secrecy associated with defense approrpriations, and the military bureaucracy is so intense that it took quite a while for the few people looking to find those $10,000 toilet seats.
We also saw a lot of "foreign aid" disappear into the ether, split up between the corrupt foreign officials and the corrupt local ones, all of it more or less going to Switzerland and Grand Cayman. Still do, actually.
More recently it's been Enron ("privatizing" electric utilities was already absurd, and anyone who followed it the time - including me - called it a blatant invitation to fraud; who knew they'd go all the way to turning off the lights to convince people of a fake shortage! Gives you an idea how little these people fear getting caught), the "airline bailout," the "farm subsidy," and of course, don't forget the "tax breaks."
Now it's a "telecom bailout."
All of these scams netted their perpetrators billions, and in some cases tens or even hundreds of billions. Almost none of the people involved have been investigated, let alone caught. It's the new American mafia, ladies and gentlemen.
Michael Powell is a notoriously corrupt FCC chairman; he's blatantly carried water for both the cable and bell monopolists, and under his watch telecom (and especially internet) service has been abyssmal (remember Northpoint? and what happened to the CLECs?) while prices have risen. It was easy for him, a smug "regulator" in a plum job snagged with handy nepotism; all he had to do was stand back and wink while the bells slaughtered their competition. You don't get a job like FCC chair under a Bush administration without knowing how the game is played... Anyway, this goofy letter to him is pretty amusing; you may as well write a letter to Satan.
Until heads start rolling in quantity (and believe me, once we started, by the time it's over we'd need to build a new federal prison), it's open season.
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Read it again.
I did read it again. Apparently, I understood the words it contained. It doesn't grant rights; it recognizes them. The notion that rights exist only because a piece of paper says they do is rather horrifying. The Constitution exists to spell out the specific powers of the government, not the specific rights of the citizenry.
Here, look
Amendment 9: The enumeration in the Constitution of certain rights shall not be construed to deny or disparage others retained by the people.
Translation: Just because we mentioned a few rights doesn't mean others don't exist. They do, because this document isn't the source of rights.
Amendment 10: The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.
Translation: This document says what the government can do. If it doesn't say the Feds can do it, then the Feds can't do it. If it says the states can't do something, than the states can't do it. Other than that, let the people decide how they want their communities to be run.
Yeesh. Before making pronouncements about what the Constitution says, maybe you should try understanding it .