What the FCC was thinking

How could the FCC take such damaging steps for competitive broadband, when it was supposedly pulling back on Chairman Powell’s "deregulation" agenda? The answer is in Commissioner Martin’s statement.

First, he says this was a compromise between "competition" and "deregulation". These two words have mystical force in telecom policy. If you live in the Beltway echo chamber and not in the real world of business and networks, it’s easy to think they mean something in the abstract. Powell (and the Bells) wanted deregulation, the Democrats (and the new entrants) wanted competition, so we get a "principled, balanced approach" that does some of both. Sorry, the world doesn’t work that way, as the Wall Street reaction to the decision demonstrates.

Second, the High Tech Broadband Coalition, spearheaded by Intel, successfully convinced the FCC that it was a proxy for "the tech industry". Martin specifically notes in his statement that, “we endorse and adopt in total the High Tech Broadband Coaltition’s proposals…." (emphasis his). That’s a big flashing red light saying, "hey, tech industry, you should love this and give us credit!"

Trouble is, there isn’t a single "tech industry" on telecom issues. There are vendors, and there are service providers. Intel and Microsoft sell software and hardware to broadband service providers, including the incubments. Their interests don’t always coincide with companies that make money selling broadband connectivity to end-users.

The technology vendors are rightly focused on next-generation networks that deliver 10-100 megabits per second to the home. I’m far less troubled by the elimination of sharing requirements for new fiber deployments (what the High Tech Broadband Coalition endorsed) than the destruction of line-sharing for today’s DSL. The problem isn’t with Intel’s position, it’s with the set of compromises the FCC made.

The trouble is that you can’t just give the tech vendors something, and the incumbent carriers something, because they play different roles. Intel, Cisco, and Microsoft won’t be the ones building the networks. The telcos have to deploy the infrastructure, and they won’t do that if they feel wronged by the FCC’s overall decision and have no competitive pressure. The order does precisely that. It re-energizes the Bells’ obstructionist strategy, and it takes away near-term competitive threats from independent DSL providers that might have spurred them to invest anyway.

Verizon Senior VP Tom Tauke’s quote says it all: "The future of telecommunications is broadband, and on this issue the commission appears to have moved in the right direction but may have important details wrong. Moreover, the future investment in the wireline network is tied to a strong financial base for the overall business." Doesn’t sound like someone planning to "jump start investment in next-generation networks," as Commissioner Martin predicted.

Additional (consistent) perspectives from Bruce Kushnick and Dave Burstein.