“I fear we will see more job loss as carriers cut their capital expenditures and refuse to move forward with new investment and growth against this Picasso-esque regulatory backdrop.” — FCC Chairman Michael Powell

RESEARCH TRIANGLE PARK — With all due respect to Solomon, as difficult as the decision he faced determining who was the true mother of the newborn baby, the Federal Communications Commission had a much tougher time debating the future of telecommunications.

In the case of Solomon’s choice, the end result was clear, albeit dangerous. Either the real mother or the thieving mother would give up claiming the newborn rather than see the child cleaved in two. You know what happened. The real mother chose life, the thief death. The baby lived, going home with Mom. And Solomon further established his reputation as world’s wisest man.

At the FCC, the five commissioners (three Republicans, led by Chairman Michael Powell — son of Secretary of State Colin Powell) had to review of telecom reform act procedures implemented on order of Congress in 1996. What steps would be taken that would ensure true competition in the marketplace, drive up deployment of new services, and make broadband services for more a reality?

Unfortunately, the FCC came to no clear-cut vision. In some ways, depending upon one’s point of view, they may have chosen to “kill” the baby — competition.

BellSouth, Verizon and others of the so-called ILECs (incumbent local exchange carriers) liked part of the decision about broadband but screamed about being forced to continue to sell at a discount “unbundled” services such as voice off their switched networks. On the other had, AT&T, MCI and CLECs (competitive local exchange carriers) like being able to get the services but are screaming about losing their broadband ride.

The badly divided board overruled Powell in some aspects, such as giving states rather than the FCC a huge stake in deciding what services the big phone companies would have to sell at a discount to other carriers. Powell did prevail on a broadband decision that means the “baby Bells” no longer will have to sell access to their fiber networks. But at the same time, Powell didn’t get what he wanted another aspect of broadband — forcing the baby bells to continue to sell access to existing copper networks, which are used for high-speed Digital Subscriber Line services. The likely effect of that, many people said, is to increase DSL prices.

“Some on this very panel have talked glowingly about facilities-based competition, but when one reviews this Order one will ask ‘where’s the beef’,” he wrote. “Today’s decision clearly steps back from a pro-facilities policy, by favoring extensive regulatory management of incumbent networks to supply the competitive market.”
Not everyone was as negative.

A split decision good for everyone? Or no one?

“At least the FCC got the rules for broadband right. The weight of the evidence before the Commission was that its forced sharing of telecom networks had gone too far, and was slowing down both new entrants’ and incumbents’ build-out of new network elements. It’s unfortunate that the agency did not also deregulate things like switching,” said Solveig Singleton, a senior policy analyst at the Competitive Enterprise Institute.

“That the states were left leeway to tailor the unbundling rules to their own state is, I think, a case of federalism choosing a most unfortunate occasion for a revival. Telephone markets and telephone investors need a consistent and reasonably uniform approach to deregulation nationwide.”

James Cramer of The Street.com and CNBC fame was far more outspoken. He sees the split decision as bad news for two big drivers — the Baby Bells and the hardware companies such as Nortel, Cisco, Juniper, Alcatel, Tekelec, Caspian which need the big guys to start spending on capital equipment again.

“No mincing words: The wrong guys won today at the Federal Communications Commission,” he wrote Thursday. — The principal driver of technology spending in the 1990s was telecommunications spending, capital expenditures –or capex, as it is called.” He cited Verizon, BellSouth and SBC Communications as the “engines.”

“The beneficiaries of that spending were the big telco equipment companies, which are now slowing, scaling back or dying,” he said.


On the other side, Harris Miller, president of the Information technology Association of America, said the decisions are “likely to reduce the number of Internet Service Providers consumers can choose from by about 99 percent.”

Ouch, ouch.

Coming Tuesday: A further look at the FCC’s decisions and the impact of those rulings on some local telephone companies.

Rick Smith is managing editor of Local Tech Wire.