Deregulating broadband would create job boom in California

A study released yesterday by the Alliance for Public Technology, a Washington, D.C.-based lobbying group supported in part by the Bell companies, said easing incumbent carrier unbundling obligations pertaining to broadband facilities would create between 31,000 and 73,500 new jobs in California as a result of facilities-based competition.

Current UNE-P pricing policies in the state stand in direct conflict to one of the stated goals of the 1996 Telecommunications Act, the "timely and reasonable deployment of advanced services to all people," said Richard Bilas, emeritus professor of economics at California State University and former president of the California Public Utility Commission (CPUC), who co-authored the study.

"The UNE-P pricing policies actually have discouraged competition and has resulted in less access to advanced technologies and, frankly, less choice for consumers of telecommunications services," Bilas said. The culprit is the TELRIC (total element long run incremental cost) pricing model, which Bilas called "simply inadequate."

"Competition does not mean that someone increases its market share because of some rigged cross-subsidization," he said. "That’s exactly what happened with the UNE-P pricing policy in California. We need to take the TELRIC and stick it in a corner somewhere."

The Federal Communications Commission has opened a proceeding on TELRIC and has tentatively concluded that the formula in the future should take into account the actual forward-looking costs of running a network, as opposed to the hypothetical costs of operating a "most efficient" network, upon which the formula currently is based. That’s not good enough, said Barbara O’Connor, professor at California State University, who also co-authored the study.

"It would be much better for the CPUC to adopt a forward-looking, incentive-based regulatory posture," O’Connor said. "I would urge the commission, because we cannot figure out the pricing in an equitable way, to stop even trying. … The [RBOCs] are dominant, but they’re not monopolists in many markets anymore. They’re losing lines like everybody else, so I think we’re transitioning to where we have a more competitive model."

O’Connor suggests that government spark broadband innovation and deployment through the following mechanisms: offering investment tax credits; creating an ongoing "fast-track" UNE review process, governed by market availability, that would remove elements from the list that were no longer needed by competitors; and developing strict performance standards for carriers along with "quick and efficient" remedies for non-compliance.

James Gordon, assistant to the vice president for the Communications Workers of America in District 9, reminded that 900,000 telecom and information industry union jobs have been lost since 2001, with 15,000 jobs lost in California. He said forcing AT&T and MCI to wean off UNE-P would be a good thing for his constituents.

"UNE-P rates were supposed to be a help for small start-up CLECs to get assistance to ultimately become facilities-based," he said. "In reality, given the current below-cost rates in California, they have caused a huge ILEC-funded windfall for the largest CLECs in the country. [MCI] and AT&T buy 90% of all of the UNEs in California, and they have the resources to compete facilities-based, but they never will if the PUC continues to underwrite the profits of these companies."