« Lott should resign | Home | MAKING 2001 TAX CUTS PERMANENT »
December 21, 2002
Telecom's next meltdown, coming soon
This piece from the WSJ op-ed page nails some of the problems with telecom regulation, which is the biggest policy issue facing tech. The growth of broadband is the biggest single factor in the growth of all of tech, and the biggest gating factor to telecom is federal intrusion. Much of the political weight driving this intrusion comes not from those looking to protect consumers, but from other companies looking to protect market share. And to those who would "protect" consumers, the unintended consequences of anti-trust and regulatory actions are doing anything but.
Telecom Meltdown, the SequelThe cycle time between bad policy decisions and their impact in the marketplace keeps getting shorter and shorter. Last week, EchoStar and Hughes confessed defeat in their satellite merger attempt, foiled by regulators. Hours later, Hughes announced for the benefit of its stock price that it wouldn't be going ahead with residential broadband rollout after all.
That was the word from Jack Shaw, the company's CEO, in an interview with one of our reporters. "No longer willing to make the risky investments" was how the Journal's Andy Pasztor phrased it. Hooking up with Echostar was supposed to give the combined company a potential subscriber base to make a satellite broadband option for regular folks a money-making proposition. But now that the merger is off? Fuggedaboutit.
These comments were aimed at investors. Any tweak to the FCC's Michael Powell and the Justice Department was purely coincidental. Which ought to have Mr. Powell and his trustbuster friends rethinking their regulatory instincts all the more. Maybe even rethinking whether their Washington reference points (i.e., the clamor of a few Senators and loose-cannon state attorneys general) are such a good guide to policy after all.Rural viewers were supposed to be winners from the decision, since vetoing the deal would leave them with two weak, money-losing satellite providers to choose from rather than one strong one. Instead, Washington may have just ensured that rural America never gets access to broadband.
The decision probably also denotes the high-water mark of satellite's challenge to local cable monopolists everywhere. Cable operators have been laying on two-way interactivity so they can bring customers high-speed Internet access and video on demand. That's in addition to the 200-channel feast of regular broadcast signals. Satellite is destined to remain a niche business unless it can match those offerings, especially the interactive ones, which seems highly unlikely now.
The reasoning behind Mr. Powell's decision was so weak that it's hardly worth going over. How rural viewers came to be accorded a "right" to competing satellite providers superior to the right of satellite company shareholders to dispose of their assets as they see fit was never explained. More to the point, everyone now realizes that the telecom disaster was a product of Washington's attempts to decree winners and losers in technological competition. The question now is whether any learning goes on inside these agencies.
A matter of much prayer in tech circles is a series of decisions coming up before Mr. Powell that will determine whether the Baby Bells are allowed to adapt and survive -- or whether, like satellite TV, they will be held in place by politicians and regulators bound by a blinkered and static understanding of the world that's happening all around them.
Specifically, Mr. Powell will have a chance to eliminate the doofus regulatory distinction between local and long distance that makes little sense to users of e-mail, wireless and voice-over-Internet; also he'll decide whether the Bells will have to keep subsidizing politically spawned competitors to nibble away at their shrinking local dialing business and their stillborn broadband businesses.
The Bells -- Verizon, Qwest, SBC and BellSouth -- once looked like the least-beaten-up winners of the telecom wars. Rumors of their survival may have been premature. This year local dialing shrank for the first time ever as more person-to-person communication went to wireless, e-mail and instant chat. In Asia, a voice-enabled Internet is now stealing traffic from traditional phone carriers. Soon it will happen here.
These are wonderful signs of technological ferment, and the more the merrier. But unless Washington wants to be left picking up the pieces of a second telecom meltdown, the Bells should be allowed their best chance to prosper in the new world too.
URL for this article:
http://online.wsj.com/article/0,,SB104008970670937233,00.htmlUpdated December 17, 2002
Leave a comment