Share and share alike

I'd hate to disappoint loyal readers of this column. So yes, this space will comment on the recent FCC UNE-P and broadband debacle. However, despite my background as an industry lobbyist, I will not pad the growing literature that analyzes the decision's minutia (whose fate now rests in the hands of a highly politicized legal process) and will temper my desire to bore you with yet another "pundit's" view on the political stock of Chairman Powell and Commissioner Martin. Besides, as with real stock, the value of personal political stock fluctuates over time. Trying to time the market in both is always a bad idea. Remember Richard Nixon? In fact, I don't know about you, but enough already on the political speculation. This is now all about who has the best legal team, and the most "juice" in the legal process.

Aside from of the illogical politics and irrational economics of the decision, and the uncertainty this attempt at Solomon-like "rough justice" has created, there are important questions about the state of the industry that only marginally have much to do with the current bickering and finger pointing. The main one boils down to this: When did sharing and being a wholesaler become bad business? OK, so the price may not be correct right now, but that is a fixable political problem. The economics are still viable.

The average person in the street does not understand the "inside the Beltway" niceties of what just happened. Memo to the industry, they also do not care. The average Joe and Jane, to the extent they followed any of this, saw nothing but a big industry/big company food fight waged in the name of the customer but whose outcome only seems to be about which entities will have the inside track on charging all us a lot more for next-generation communications services of problematic real value, even as they make the case that denying us choice and access today will give us more of both in the future. It does not, and should not, be this way. Yet, unfortunately, the view from Main Street may not be such a bad encapsulation of the reality.

From a slightly more-learned perch than just sitting and schmoozing with neighbors at the local Starbucks, while not paying them $10 for a short Wi-Fi experience, I come away from the recent events more confused than ever on a number of scores:

1. Equal access, open and reasonable interconnection, primary carrier selection and fair resale have worked in the past and continue to work today. This would include: the original creation of the competitive long-distance (LD) business, the subsequent participation of the RBOCs in LD to the extent that Verizon recently surpassed Sprint as the No. 3 LD carrier in the U.S. despite a minimal national local footprint, and a robust wireless resale industry, just to name a few. So why not apply the same principals--that have created industry jobs and profits, and consumer choice and price competition, in all these markets--to the local narrower-band business and in the local broadband business going forward? All of the principals Chairman Powell espouses have been proved in fact rather than theory, yet he wants to try a new theory. I don't get it. What is the FCC's case as to why it is OK for local companies to resell other network operators' assets to provide end-to-end services, but those same companies can't enjoy the same treatment coming the other way?
    

2. Where is the true market test that unbundled network element pricing, whether overseen by the feds or the states, is confiscatory? Wouldn't a great market test be enforcing the terms of the SBC Communications acquisition of Ameritech, and the Verizon acquisition of GTE, where the acquiring companies agreed to compete in the local exchange business outside of their franchise areas? 
   
   Wouldn't RBOC-vs.-RBOC local competition clarify what "fair market" wholesale prices for unbundled network elements ought to be? Give them some pricing flexibility, overseen by the states if necessary, so they can negotiate a "fair" wholesale price. Plus, to be frank, local competition is going to have to be based on equal access and interconnection and reasonable resale.
   
   In fact, why not make it really interesting? Why not tell the cable companies that if they wish to go into the interactive voice business, they will be subject to the same access, interconnection and resale conditions on their plant, and then the consumer could pick their primary broadband carrier just as they pick their primary local and LD carriers? Let's face it, we'll all be taking dirt baths before there is universal municipal acceptance of a new round of street destruction, and they may restrict the use of the airwaves as well. There should be equal access and interconnection at a price where everyone can prosper, but we should, to the extent possible, let the market decide it.  We have the way. Clearly, the FCC lacks the will.
    

3. All of the focus of all of the analyses, and all of the reaction, has been about what companies can't or won't do. It seems to be a done deal that if the local exchange carriers do not have to give others access to their networks, they won't. The RBOCs are so hell bent on this that they are taking the decision to court because they believe in leaving no stone in the construction of their walled gardens unturned. Given the above analysis, one wonders if they would accept the elimination of the resale and primary carrier selection rules in the LD market now that they have entered? It also begs another question: If wholesaling seems to be a profitable business in virtually every other area of economic activity, including the provision of utility services, around the world, what is it about the U.S. and the local interactive communications business that is so unique that it needs regulatory protection to insure against it?
    

4. One last little one on the decision itself: If those who wish to use incumbent carrier copper lines to resell Internet access must demonstrate they will also sell voice services, does that mean the incumbents using DSL lines for Internet access must also sell voice on those lines or not be allowed into the Internet access business? It would only seem fair.

The bottom line needs to be the bottom line. Logic and fundamental economic sanity needs to prevail.

It would be nice to hear just one of the defenders of Chairman Powell, or the Chairman himself, say that while the decision contemplates the elimination of restrictions on giving competitors access and interconnection on reasonable terms and conditions, the expectation is that the robustness of the marketplace will compel the incumbents to willfully open their networks to all comers so we can go on with the true business at hand--closing rather than widening the distance between the U.S. and other developed countries on the universal provisioning of broadband services. Share and share alike is not just good business, it is the only reasonable business model for success in the future. 

Peter Bernstein is President of Infonautics Consulting Inc. He can be reached at pb111451@optonline.net.