Can Technology Save Competition in Telecommunications? John W. Mayo Georgetown University (202) Phoenix Center December 16, 2004

The Optimism of 1996 “Opportunities abound” for both industry and consumers “Opportunities abound” for both industry and consumers –Commissioner Susan Ness “Catapult this country right into the Information Age” “Catapult this country right into the Information Age” –Commissioner Rachelle Chong “I can now confidently predict that the Telecommunications Act of 1996 will usher in an era of communications innovations that will shortly make our present arrangements as antiquated as the Guttenberg Press.” “I can now confidently predict that the Telecommunications Act of 1996 will usher in an era of communications innovations that will shortly make our present arrangements as antiquated as the Guttenberg Press.” –Senator Howard Baker

The Vision of the Post- Telecommunications Act Competition Pre-divestiture BOC Long lines Post-Divestiture BOC MCI AT&TMCIIXC Post-Act BOC LD BOC CLEC LD

The Reality of 2004 “Since Congress passed the Telecommunications Act of 1996,the [RBOCs] have had three primary policy objectives: 1) long-distance entry in every state; 2) elimination of unbundling requirements…; and, 3) elimination of competitive entry strategies…. We believe the Bells have largely achieved these goals. …they face shrinking competition.” [Source: Legg-Mason, September 15, 2004 “Since Congress passed the Telecommunications Act of 1996,the [RBOCs] have had three primary policy objectives: 1) long-distance entry in every state; 2) elimination of unbundling requirements…; and, 3) elimination of competitive entry strategies…. We believe the Bells have largely achieved these goals. …they face shrinking competition.” [Source: Legg-Mason, September 15, 2004

Bankrupt and Discontinued Telephony Entrants

Can Technology Save Competition in Telecommunications Verizon Communications Inc. (VZ.N) and Qwest Communications International Inc. (Q.N) said on Thursday they had seen large drops in new residential telephone lines grabbed by competitors since AT&T Corp. (T.N) announced a retreat from residential service in July…. Verizon Communications Inc. (VZ.N) and Qwest Communications International Inc. (Q.N) said on Thursday they had seen large drops in new residential telephone lines grabbed by competitors since AT&T Corp. (T.N) announced a retreat from residential service in July…. AT&T's decision stemmed from changes in those FCC rules that it said would lead to cost increases. Industry executives and analysts say AT&T's move and similar strategies by other Baby Bell competitors might allow the Bells to recapture most of the 17 million local lines that competitors now lease under federal rules, boosting earnings. (emphasis added) AT&T's decision stemmed from changes in those FCC rules that it said would lead to cost increases. Industry executives and analysts say AT&T's move and similar strategies by other Baby Bell competitors might allow the Bells to recapture most of the 17 million local lines that competitors now lease under federal rules, boosting earnings. (emphasis added) –Reuters -September 9, 2004

Can Technology Save Competition in Telecommunications? The Other “Reality” Telecommunications markets are all “perfectly contestable” and ILECs face robust competition from – Telecommunications markets are all “perfectly contestable” and ILECs face robust competition from – – Cable, Wireless, Power Lines, Internet (VOIP) Need to ask serious questions: – –Do Wireless and Landline compete in the same market? – –Are Power companies actually providing telephony? – –Can Cable offerings in California limit market power of Verizon in Washington DC? – – Does the broadband platform limit the extent of competition from VOIP? – –Should public policy be content with a duopoly platform for as far as the eye can see?

“If we knew what we were doing, it wouldn’t be called research, would it?” Albert Einstein