Who owns the network?

The FCC is once again wrestling with some basic issues that affect competition, primarily for business services, in the U.S. market. Major incumbent service providers — AT&T, Citizens/Frontier, Embarq, Qwest Communications and Verizon — are asking if they can sidestep rules requiring them to resell use of their network facilities to competitors through what are known as forbearance petitions. The incumbents say competition is well-established and no longer needs federal help.

Without such rules, to be certain, there probably wouldn't be competition, except perhaps at the very high end of the market. When the first local service competitors came on the scene in the 1980s, they built fiber optic rings around downtown metro areas and connected buildings once a large customer had ordered service. But the competition that exists today reaches down to small- and medium-sized businesses, very often by leasing access lines from incumbent service providers. As I note on page 10, the competition for the SMB customer has never been greater.

Without federal requirements for resale, however, the incumbents are free to decide whom they want to sell to and at what price. CLECs are protesting these new freedoms based in large part on past experience. McLeod Communications says, for example, that when Qwest was granted forbearance in the Omaha, Neb., market, it jacked up access prices 72%.

The real issue here is over who owns these networks. The incumbents certainly have paid to build them, upgrade them and maintain them. But it can be argued that much of that construction — the hardest part of connecting homes and businesses — was done in the monopoly days when telcos didn't have customers, they had rate-payers, and guaranteed rates of return.

Elsewhere, particularly in Europe, incumbents have been forced to open their networks, which has resulted in much more competition, especially in new markets such as broadband (look at the U.K.) and IPTV (check out France).

The momentum in the U.S. has been going in the other direction, thanks largely to the Republican majority in the FCC. The forbearance rulings coming this fall will go a long way to determine what the face of local competition will be going forward. It's time the FCC brought some real clarity to the issue.

Speaking of concepts that are hard to pin down, Google's future as a wireless service provider is the subject of much speculation, primarily because the company itself isn't talking. But our wireless expert, Kevin Fitchard, found some analysts who are on page 32. And when it comes to uncertainty, in-home wiring is a major question mark for service providers delivering IPTV, as Tim McElligott discusses on page 28.

P.S.: Don't forget Telephony LIVE, our two-day conference designed to explore the future of telecom. We hope to see you Oct. 10-11 in Dallas. Learn more at telephonyonline.com/telephonylive.