Preserving Competition

By Charles Cary, vice president of small business services, XO Communications

Competition fosters innovation and affordable prices. In telecom, lawmakers passed the Telecom Act of 1996 to promote competition. Given the subsequent drop in rates, the increase in innovation and the many new consumer and business services since then, any reasonable person would claim the act has been a success.

Now, regulators and lawmakers need to help preserve the innovation and competition fostered with the ’96 act. One way is to ensure that the rebuilt Humpty Dumpties (read incumbents Verizon and AT&T) don’t get their way on some key pending issues and end up with all the eggs in their baskets.

Over the past few years, industry consolidation has increased the lobbying power of the incumbents to a dangerous level. Currently, there are a number of issues where the outcome could have significant detrimental effects on competitiveness.

Let’s look at two.

1. Forbearance.

Forbearance is a provision in the Communications Act whereby incumbents can avoid complying with regulations or provisions. Currently, Verizon is requesting that they be exempt from regulations in six key markets in its territory (New York, Philadelphia, Boston, Pittsburgh, Providence, R.I., and Virginia Beach, Va.). Markets where they still own dominant market shares. A recent economic impact study by market researcher QSI Consulting, found that if forbearance were granted, businesses and residential consumers could see rate increases of 17 percent to 28 percent.

2. Retiring Copper Loops.

The ’96 act authorized competitive providers to use the incumbent’s networks. Now, the incumbents are eliminating access to copper plant by retiring in-place or pulling out copper plant as they deploy fiber. Given the tremendous progress of technologies getting higher and higher speeds from the copper, such as DSL, it would be short sighted to allow this asset, which was built with ratepayer funds and government subsidies, to be pulled.

Consumers and businesses have benefited greatly from the Telecom Act of 1996. Ensuring the act’s pro-competitive policies continue is essential to further benefits. It is critical that members of Congress and policy makers throughout the government stand up to ensure the development of a healthy, competitive telecommunications industry.

Charles Cary is a seasoned executive with expertise in telecom, IT, enterprise software, and internet industries, both domestic and international. Currently, he is vice president of small business services at XO Communications. In addition to running marketing organizations, Cary has significant finance, sales, and general management experience. Other companies where Cary has worked include Nortel Networks, AT&T Inc., PSINet, and CGI AMS. Cary has an M.B.A. from the University of Michigan.

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