Shifting tides at the top
A few months ago, FCC Commissioner Michael Powell spoke before an industry group and announced his belief that the FCC sometimes improperly regulates all businesses as though each were the size of a regional Bell company. Powell suggested that such regulatory tactics were wrong and did not reflect the entirety of the industry.
Within that speech laid a glimmer of hope for small businesses and minority-run start-ups that have struggled against the policy of “bigger is better,” the mantra-on-sampler revered by the past Reed Hundt administration. Although Hundt believed that all telecommunications services might be delivered by no more that six competing entities, small businesses railed against this heretic to true competition.
At the core of this running debate is the definition of “competition.” This one word and the implications its definition has in the creation of regulation is of paramount importance in determining the future of our industry. Stripped to the bone, the debate is a struggle for the soul of the FCC, which resonates from the commissioners’ combined vision of the paths that lead to competition in the marketplace.
Recently, in his dissenting statement within Docket 98-56 regarding future regulation of Operations Support Systems, Commissioner Harold Furchgott-Roth said, “… for most of the past century, regulators, rather than consumers, made choices both about who may enter a market and about the terms and conditions of commerce. And regulators practically always chose a single provider, no competition and narrowly regulated terms and conditions. Even where competition and private contracts were viable, regulators often insisted on using regulation rather than contract to manage transactions in telecommunications markets.”
The good commissioner thus joined his colleague, Commissioner Powell, in suggesting that the telecommunications industry lacks the zeal and blood of true competition, that market entry is too restrictive and that the agency should simply get out of the way.
Regulatory litmus test
Having published this mini-manifesto, Commissioner Furchgott-Roth may be called on to demonstrate the will behind his words. It is one thing to claim to be a supporter of free markets. It is another to resist the strength of huge companies that lobby, cajole, contribute to politicians, accept positions of power within cabinets and run rings around the antitrust division of the U.S. Department of Justice.
For example, can one both support the auction of radio spectrum and be an avowed believer in free-market competition? The answer is no. Auctions are, by their nature, anticompetitive, as they favor the rich over the poor, the well-financed over the well-intentioned and the established over the new. In holding auctions of spectrum at every turn, the agency has opted for less, not more, opportunity and competition by regulating the number, size, construction schedule and more, of any participant.
Can one support mandatory frequency migration and still claim a kinship with free-market ideals? Again, the answer is no. If left alone, the market would create private contracts for any migration that is deemed essential for the delivery of serv-ices. Arms-length negotiation would perform what the agen cy’s arm-twisting regulation seeks.
Can Commissioner Furchgott-Roth cling to his published ideals and still support licensing of radio systems employing geographic boundaries? Still, the answer appears to be no. County boundaries do not reflect consumer-demanded system configurations. They are, instead, arbitrary lines on a map employed simply for the ease of agency administration. Therefore, such licensing fails the good commissioner’s articulated test.
Finally, does a free-market approach support the granting of licenses across huge blocks of spectrum for undefined, unconstructed, unformulated services? One would be hard-pressed to answer in the affirmative. The FCC has long demonstrated disdain for spectrum warehousing, and recent licensing of large frequency blocks fully demonstrates the valid basis for the agency’s long-held position. When spectrum is reduced to a commodity for trade among the richest companies, it serves as bait for investors rather than as the stuff from which serv-ices to the public are made.
Consumer as king
There is more than a hint in Commissioner Furchgott-Roth’s statements that the consumer should be the ultimate decision maker as to which services should continue to be provided. He stated in his opinion “… in the best of worlds, consumers-by selecting higher quality services at lower prices from among competing providers-decide which businesses may enter and survive in a market and which may not.” Yet, is the consumer being given the right to make this decision?
The existence of auctions as the preferred licensing method restricts from the outset the number and type of providers that will compete for consumer dollars. The cost paid at auction is passed on to the consumer. An accelerated construction schedule for those services further raises the cost of providing services. The net result is that consumers are made to bear the cost of an overregulated, over-allocated service in fees and charges.
Providers are encouraged to bring only the most advanced, multitask, interconnected services to the market to justify high airtime billing and usage charges, thus reducing the market’s suppliers of bread in favor of suppliers of fancy cake. Therefore, the competition among cake providers is increasing, while bread lines are forming for basic services.
Although the FCC’s rhetoric has focused on its efforts to increase the high-end serv-ices marketplace, the Commission’s public self-congratulations have ignored the concurrent effect on providers of basic paging, two-way, dispatch and telephone services on which the vast majority of the American public continues to rely.
If Commissioners Powell and Furchgott-Roth are sincere in their reservations regarding the direction of the Commission and its all-too-dynamic definition of “competition,” then licensees and operators might expect a change in the regulatory tides. Although the regulatory currents have been strong upon the rocky shoals that tear the tiny boats of small operators and consumers, an undertow of regulatory restraint might have begun.
It could be that “competition” among all operators might be promoted in the future. One might discover greater market access being created, less arbitrary concentration of spectrum and market share, and a reduction in emphasis on FCC administrative efficiency as a justification for increased burdens on licensees. Two commissioners are beginning to explore these vital issues. It only takes one more to make a majority.