Telecommunications Policy for the 21st Century
U.S. telecommunications policy must focus on investment in universal, affordable high-speed Internet networks, which in turn will spur job growth in the faltering telecommunications and information technology sectors and through out economy. These two sectors of the economy have lost more than 750,000 jobs over the past three years. A universal broadband network will generate 1.2 million jobs, according to a Brookings Institution study.
The U.S. has fallen behind other countries in broadband deployment, and now ranks 11th in the world in the number of households with high-speed Internet, according to a 2003 study by the International Telecommunications Union.
Rather than focus on investment and job growth, the FCC’s local competition rules center on fostering resale competition in local telecommunications markets. Resale competition discourages investment in two ways: incumbents don’t invest when they have to lease their networks to competitors at below-cost prices, and competitors don’t build alternative networks because renting is so cheap.
On March 2, 2004, the D.C. Circuit Court of Appeals for the third time ruled that the FCC’s UNE-P rules – the unbundled network element platform -- that require incumbent local exchange carriers to lease their local networks at below-cost prices do not conform to the Telecommunications Act of 1996. According to the D.C. Circuit, the FCC failed to set a competitive impairment standard that appropriately balances costs such as investment disincentives and complexities of shared facilities against potential competitive benefits. The D.C. Circuit also ruled that the FCC improperly delegated to the states the authority that Congress expressly gave to the FCC to determine what network elements must be unbundled.
It is time to move on from debate over resale of local voice markets to a policy that encourages universal deployment of advanced networks. The failed UNE-P unbundling regime has resulted in $30 billion reduction in capital expenditure by the four local Bell companies over the past two years. Since January 2002, the four local Bell companies cut 51,000 good high-wage, career CWA-represented union jobs. Equipment manufacturers have suffered; for example, Lucent reduced its non-management workforce by 60 percent over the past two years. (These figures do not include management job cuts or cuts in jobs represented by other unions.)
These job cuts are not matched by competitive local exchange carrier (CLEC) job growth. According to the Bureau of Labor Statistics, telecom services employment dropped by 270,000 jobs over the past three years. Computer electronics manufacturing employment dropped by an additional 500,000 jobs over the same period.
There is no need to fear that the end of UNE-P resale will result in higher prices and the end of local competition if UNE-P resale goes away. Local and long-distance bundled service offerings by wireless and wireline carriers are driving down price and providing consumers choice. With advent of Voice over Internet Protocol (VOIP), incumbent carriers have incentives to negotiate wholesale resale agreements with competitors to keep traffic on their networks. Moreover, competition from alternative technologies is thriving. There are almost as many wireless subscribers as wireline subscribers: 148 million to 156 million. Consumers spend more time e-mailing, instant messaging, and talking on their wireless phones than on their wireline phones: 85 minutes compared to 45 minutes per day. Cable modems are beating wireline DSL two to one, and Voice over Internet Protocol telephony is expected to explode over the next few years.
To be sure, the FCC must protect current UNE-P customers ensuring a reasonable transition period, even as UNE-P providers such as AT&T transition employees to other lines of business.
In sum, policymakers should focus on making sure the United States is second to none in broadband services, including a laser focus on closing the digital divide, and not on resale competition that carries real costs in terms of jobs, network investment, and economic growth.
Policymakers should oppose any intervention by the Solicitor General that would support an appeal of the FCC’s Triennial Review Decision to the Supreme Court.
