Transcript PowerPoint97 source file

The Politics of Bandwidth:
Convergence, Globalization and the Future
of Telecom Regulation
Glenn B. Manishin, Esq.
Patton Boggs LLP
8484 Westpark Drive
McLean, VA 22102
703.744.8095
<[email protected]>
Overview
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Public Policy in the Convergence Era
Network Scale and Market Concentration
The Regulatory Trilogy Redux
Bandwidth Unlimited & Internet Everywhere
Beyond the 1996 Telecom Act
Regulatory Uncertainty and Innovation
Back to the Future
19 Septemer 2000
Glenn Manishin
<[email protected]>
USTA NSAC #51
Public Policy in the Convergence Era
• The Cycles of Convergence
Pace of Technical
Change
Business and
Market Risks
19 Septemer 2000
Political and Policy
Conflict
Pressure on Legacy
Regulations
Glenn Manishin
<[email protected]>
USTA NSAC #51
Technical Factors in Convergence
• Commoditization of transport
• Integration of IP
• Decentralization of intelligence
– Growth of “edge networks”
– Fiber to the RT (project pronto)
• Ubiquity of wireless networks
• Caching, content and privacy
19 Septemer 2000
Glenn Manishin
<[email protected]>
USTA NSAC #51
Policy Uncertainty of Convergence
• TA96 — avoiding complexities
– Political issues dumped on regulators
• Regulatory bureaucratic imperatives
– Policy as social engineering
– Electoral politics
• Business imperatives
– Market instability creates regulatory risk
– The “ostrich syndrome”
19 Septemer 2000
Glenn Manishin
<[email protected]>
USTA NSAC #51
The Regulatory Impact of Convergence
• Who regulates?
• What is regulated?
• How is regulation
applied?
• FCC v. States, EU v
DOJ, congress v.
Courts, etc.
• Computer II, VoIP, etc.
• ROR, price caps,
benchmarks, etc.
• Where is regulation
applied?
• Rates, interconnection,
mergers, content, etc.
19 Septemer 2000
Glenn Manishin
<[email protected]>
USTA NSAC #51
Network Scale and Market Concentration
• Big fish in little ponds
– End user pressure for globally integrated
services and content
– M&A activities creating larger-scale networks
– Existing regulatory “silos” preserve artificial
market distinctions from earlier technical eras
• Merger review and policy extortion
• Policy challenges from intermodal M&A
19 Septemer 2000
Glenn Manishin
<[email protected]>
USTA NSAC #51
Regulatory Leverage in Concentration
• Out-of-region RBOC
entry obligations
• OSS/271 conditions
• Advanced services
collo., line sharing
• Internet backbone and
sales divestitures
• USF and access
pricing concessions
19 Septemer 2000
• Title VI (cable) open
access
• Wireless market
divestitures
• Content neutrality
• MSO deconcentration
• Standards
development (IM, etc.)
Glenn Manishin
<[email protected]>
USTA NSAC #51
The Policy Inversion of Concentration
Atomistic
monopoly
networks
Concentrated
competitive
networks
Price/entry
regulation
Social policy
regulation
19 Septemer 2000
Glenn Manishin
<[email protected]>
USTA NSAC #51
The Regulatory Trilogy Redux
• Interconnection, universal service and
access charges
– 1996 Act dictated standards for only 2 of 3 legs
of the stool
– Congress provided broad, ambiguous and
internally contradictory principles
– FCC developed phased-in approach
• State PUC political pressures
• Protective regulation of small/rural market networks
19 Septemer 2000
Glenn Manishin
<[email protected]>
USTA NSAC #51
Interconnection in the Convergence Era
• UNEs, UNE-P and resale
– Federal/state dichotomy creates forum shopping
and policy delay
– UNE theory conflicts with network architecture
in large-scale network interconnection
• TELRIC pricing remains frozen (Iowa Utilities Bd.)
• Non facilities-based I/C is short-run policy only
– Voice (telephony) and data (DSL, etc.)
interconnection rules differ markedly
19 Septemer 2000
Glenn Manishin
<[email protected]>
USTA NSAC #51
USF in the Convergence Era
• USF, costing and social engineering
– Existing structure accepts historical “revenue
requirement” approach to internal subsidies
– 1996 Act allows broad regulatory leverage over
scope of USF-supported services
• Schools/libraries Internet initiative confuses
regulatory paradigms
– Asymmetric contribution scheme incentivizes
“creative” classification of convergence services
19 Septemer 2000
Glenn Manishin
<[email protected]>
USTA NSAC #51
Access Charges in the Convergence Era
• Costs, CALLS and “uneconomic bypass”
– Failure of USF costing preserves inflated
access rates and CLEC arbitrage opportunities
• Universal service constraints to loop/NTS cost
allocations to end users (SLC, PICC, etc.)
• Competing financial (depreciation) and market
(bandwidth charges) ILEC challenges
– Major players (CALLS) unilaterally dictating
access charge policies
19 Septemer 2000
Glenn Manishin
<[email protected]>
USTA NSAC #51
Reexamining the Trilogy?
• FCC and Congress resist fundamental
assessment of conflicting policy goals
(competition v. subsidies, etc.)
• Market pressures force transitional
exemptions to efficient pricing and explicit
subsidization principles
• Hidden taxation inherent in current scheme
is political “Emperor’s New Clothes”
19 Septemer 2000
Glenn Manishin
<[email protected]>
USTA NSAC #51
Bandwidth and Internet Everywhere
• Bandwidth impacts markets and regulation
– Availability increases multi-purpose use of
networks that cross regulatory boundaries
– Commoditization decreases justification for
price regulation of transport and final services
– Caching architectures place pressures on “pipe”
networks to play in content space
• Regulators caught in MOU, circuit-switched
model that doesn’t translate
19 Septemer 2000
Glenn Manishin
<[email protected]>
USTA NSAC #51
The Bandwidth Dilemma
• Should new networks be subjected to
economic regulation or should legacy
networks be deregulated?
• How to harmonize long-run convergence
competition and short-run residual market
power?
• Are social policy goals (“digital divide”)
justification for regulatory taxation?
19 Septemer 2000
Glenn Manishin
<[email protected]>
USTA NSAC #51
The Trilogy (Now and Tomorrow)
• Switched MOU and
per-line special access
charges
• USF limited to
telecom revenues
• Interconnection
applicable only to
telephony
19 Septemer 2000
• Capacity-rated charges
indifferent to usage
• Contributions assessed
evenly on IP and
legacy networks
• Backbone (peering)
and cable systems
subject to I/C rules
Glenn Manishin
<[email protected]>
USTA NSAC #51
Internet Ubiquity
• From PDAs to cars to
refrigerators
– Standards become
competitive battles
– Content distribution
becomes problematic
– Transport becomes even
more essential
• Content integration creates
new regulatory cycle
19 Septemer 2000
Glenn Manishin
<[email protected]>
TCP/IP
Cable
Content Providers
Telecom
USTA NSAC #51
Beyond the 1996 Telecom Act
• When will telecom policy evolve?
– The VoIP abyss (1996-?)
– Access charges and USF (CALLS)
– Broadband policy
• Open access (cable)
• ILEC deregulation (DSL)
– Beyond the basic/enhanced dichotomy
• “Chinese water torture” of policy
19 Septemer 2000
Glenn Manishin
<[email protected]>
USTA NSAC #51
Building a New Paradigm
• Difficult long-run policy issues take time
– Transitional level playing field regulation or
wholesale deregulation?
– Moving communications away from subsidies
and social policy-based regulatory structures
– Conclusion on sustainability of CLEC comp.
• Politics and policy leverage (agency and
competitors) incent even more delay
19 Septemer 2000
Glenn Manishin
<[email protected]>
USTA NSAC #51
Who Will Build the New Order?
• Congress satisfied with delegation,
oversight and blame-shifting
– FCC/Administration enjoying unparalleled
policy success from extortion
– Private sector too engrossed in building new
networks
• Eggheads politicized and indecisive
• EU meanwhile flexes regulatory muscle
19 Septemer 2000
Glenn Manishin
<[email protected]>
USTA NSAC #51
The Consequences of Temporizing
• Network and business strategy lacks
predictable policy planning basis
• Bad results/precedent from application of
antiquated classifications (e.g., Frame Relay)
– Increased difficulty of political consensus
– Costs of regulatory “true up” increase (e.g., 1984
Cable Act)
• Policy formation ceded to Europe
19 Septemer 2000
Glenn Manishin
<[email protected]>
USTA NSAC #51
Regulatory Uncertainty and Innovation
• Innovation effects of uncertainty
– Technical developments freed from shackles of
old classifications and silos
– Cooperation among players incentivized,
except where in conflict with leverage goals
– Efficiency and QOS influenced by hard
economics instead of regulatory considerations
• How much does policy temporizing impact
network design and development?
19 Septemer 2000
Glenn Manishin
<[email protected]>
USTA NSAC #51
Back to the Future
• Future of bandwidth regulation looks like
distant past
• Achilles Heel of 1996 Act era is extinction
of utility regulation principles
Market I/C
Price dereg.
Innovation+
Public utility model
Universal service rationale
Competition suppressed
Market I/C
Price dereg.
Innovation+
1880s-1920s
1934-1996+
2000-?
19 Septemer 2000
Glenn Manishin
<[email protected]>
USTA NSAC #51
Conclusions
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“I feel the need for speed”
Superman and X-Men (Rubber Soul)
“If you build it, they will come”
40 years in the desert?
La Plus Ca Change
“Enjoy the ride”!
19 Septemer 2000
Glenn Manishin
<[email protected]>
USTA NSAC #51