A Tough Act to Follow

We gather here at COMPTEL PLUS just a little more than 10 years after the Telecommunications Act of 1996 was passed. While the legislation was created to offer industry players more certainty about the competitive environment, it turned out to be a decade of surprises.

The Act held much promise to promote competition among carriers large and small. But, as we all now know, it faltered in many areas.

Of course, the aftermath of the Act didnt happen in a vacuum; there were many forces in play that led us to where we are now. Lawmakers inability to adequately address next-generation technologies (namely IP), some of which at the time were glimmers on the horizon; the FCCs interpretation of the Act; eager carriers overexpansion of their fiber networks in light of the Internet bubble; a once-booming economy that toppled like so many Jenga pieces and crushed many CLECs in the process; and new competition from cable operators all contributed to a bumpy 10 years under the Telecom Act of 1996.

I think, in general, the Act failed because it assumed that there were going to be competitors in the local loop, and that the numerical measure of the number of competitors was somehow a measure of the competitiveness of their offerings, which turned out to be incorrect, James Crowe, CEO of Level 3 Communications Inc., told xchange in a recent interview. Another thing that made the bill irrelevant was a lack of understanding of the huge role the Internet would play in communication.

All this has led some in industry and legislative circles to call for a rewrite of the Telecom Act of 1996. And, in fact, some work has begun on this in Washington. While new issues, such as how VoIP should be regulated, how the universal service issues should be handled in light of new players and the future of local cable franchises have popped up in recent years, many of the issues service providers wrangle over today are not much different than those of 10 years ago or earlier and those concerns largely revolve around access to other carriers (namely incumbent telco) networks.

COMPTELs President and CEO Earl Comstock says CLECs want policies providing for nondiscriminatory interconnection, service upon reasonable request, net neutrality (meaning the ability for a provider to deliver content or services on another carriers broadband pipe if the subscriber wishes to invoke such services) and the ability to resell services.

Of course, the 96 Act attempted to address some of these issues, but Comstock doesnt fault the Act so much as the FCC for the failure of these things to materialize. The FCC also slighted CLECs when it decided not to apply UNE rules to fiber deployments, he adds. The negative side is that now that the Bells are into long-distance in a big way, essentially you cant go back and unscramble that egg, Comstock says. They took the carrot and gave it to the Bells without really having everyone else get the benefit of what that carrot was supposed to provide namely a local market that was unalterably open to competition.

But, whether or not new federal telecom legislation surfaces this year and most believe a new act in 2006 is a long shot the chances are great that any new rules will weigh heavily to the RBOCs advantage, given that the RBOCs are giant political contributors.

So competitive carriers just need to continue to do their best to convince the powers that be which telecom regulations will be best for consumers and the economy at large, and, in the meantime, build business plans that dont rely too heavily on a favorable regulatory outcome.