We Need a Telecom Network Ownership Society

We Need a Telecom Network Ownership Society

December 13, 2004

This Wednesday and Thursday I will attend the White House Economic Summit where we will discuss the the President’s Ownership Society agenda. Ironically, down the street, the FCC will meet Wednesday to discuss a draft of their long-awaited Tri-Ennial Review order (TRO) that has been circulating in WDC. Language in the draft could be a real setback for property rights in the sector by imposing (deep-discount) controlled prices on access to large buildings, even where it is already being provided at market terms. We need clear network ownership rules to generate the capital spending we need to compete in the global markets.

The DC Circuit Court decision six months ago plainly told the FCC to restore property rights in network assets. They have made progress doing so for broadband. But now the FCC is trying to give the CLEC’s a boost by entertaining switching high capacity access from market prices to (discounted) controlled prices. And this in spite of the strong stock prices for the major CLECs since last summer, AT&T’s recent positive earnings signal, last week’s Sprint-Nextel merger announcement, and recent indications that landline capital spending in the sector is finally rising.

We don’t need King Solomon. We need an FCC that follows the law and the direction of the courts.

CLECs already have access to the buildings–over 535,000 lit buildings through owned networks and commercial leased access agreements with other network owners. And CLECs own more than 300,000 miles of fiber today.

This isn’t about access; it’s about money. Forcing carriers off commercial agreements onto controlled TELRIC pricing would lower lease costs by more than 30% — a huge corporate welfare payment to the CLECs. Ruling on competition levels building by building would be a legal and competitive nightmare.

The FCC granted the ILEC’s flexible pricing for special access in 2001; since then prices have declined more than 10% per year.

The study of telecom reform the US Chamber of Commerce delivered in October, with me among the authors, estimated that well-defioned property rights and other reforms could trigger $58 billion of capital spending and over half a trillion dollars of GDP over 5 years, cut telecom per-minute charges by half, and permanently increase productivity by providing small businesses with the high-speed telecom services they need to compete with other companies in China, Korea, and India that already have it.

Time to get going on that agenda.

John Rutledge

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