A WSJ Letter to the Editor They Wouldn't Care to Publish (which I mostly agree with)

[Dave Farber <dave () farber net>]

------ Forwarded Message
From: Rob Frieden <rmf5 () psu edu>
Date: Tue, 07 Jan 2003 08:50:45 -0500
To: dave () farber net
Subject: A WSJ Letter to the Editor They Wouldn't Care to Publish

Hello Professor Farber:

        Perhaps I am the last telecom professor lacking an ILEC or CLEC
"research" benefactor { I HAVE NONE djf} .  I have the apparently rare
privilege of making policy calls on the merits, including chiding the Wall
Street Journal for doctrinal dribble.  Attached is a letter to the editor
challenging their latest editorial supporting Bell company "liberation" of
fundamental common carrier responsibilities and Telecom Act of '96
requirements:

        Just once in my lifetime I would like to see the Journal get a
realistic grip on the telecommunications sector.  Your January 7, 2003
editorial entitled A Telecom Breakthrough yet again buys into false visions
created by wishful thinkers, otherwise known as the legions of hired gun
economists and lobbyists who have encouraged flawed thinking.

        First, you have swallowed hook, line and sinker the unproven claims
of the Baby Bells that the Federal Communications Commission requires them
to provide services to competitors at below cost.  The Supreme Court did not
buy this claim and neither should you.  No incumbent carrier has proven that
it has subsidized competition by having to interconnect facilities at rates
approved by state public utility commissions. Common carriers have to
interconnect their facilities with other carriers.  Without this fundamental
requirement, MCI and other long distance carriers could not offer a national
service, something AT&T sought to thwart in the court room and the switching
office.  I see the same strategy played out again as the Baby Bells seek to
prevent local service competition.

        Congress, not the FCC required local carriers to unbundle their
services so that competition could take hold sooner than if new ventures had
to duplicate the networks of incumbent operators.   The FCC and state public
utility commissions have to ensure that local exchange carriers comply with
this requirement.  Without a fundamental requirement for telecommunications
carriers to interconnect networks balkanize and become disconnected,
incumbents thwart developing competition and consumers cannot accrue the
benefits of competition unless and until a newcomer duplicates an
incumbent's network.  By the Journal's thinking a new airline, such as
JetBlue, would have to commission the construction of a new airport, lest it
capture some of the financial benefits incumbent carriers paid in the
construction of existing airports.

        Second, state public utility commissions and not the FCC have
ordered incumbent exchange carriers, such as SBC, to lower the rates they
charge.  The Baby Bells have responded with rhetoric and not facts, and the
Journal apparently cannot distinguish the two.  You have bought into the
vision that if federal and state regulators lay off then miraculously the
Baby Bells will make the information revolution a reality. Abandoning
regulation and repealing laws will result in a telecom freeze as money,
entrepreneurs and true visionaries retreat the sector.

        Third, the Journal has conveniently ignored the fact that market
entrants and their investors and lenders pumped over $500 billion dollars in
the telecommunications sector-so much for the view that newcomers creamskim.
Much of this investment lies fallow in part because incumbent carriers have
failed to live up to their legal obligations.  The Telecommunications Act of
1996 coupled local Bell telephone company entry into long distance markets
with competitive local carrier access to Bell facilities.  Nothing in this
law required subsidized or below cost access.  Now having authorized the
Bell companies into 35 of the 50 states the FCC appears ready to dismantle
the Bell carriers' access obligations.  Legally telephone companies remain
common carriers, with interconnection duties similar to that required of
electric, gas, water and other public utilities.  I do not read the Journal
waxing poetic about the confiscation of public utility company resources
when Congress and many states mandated access to the distribution grid.
What justifies makes the existing telecommunications grid off limits?


        Regards, Rob Frieden


Pioneers Chair in Cable Telecommunications and Professor
Penn State University
105-c Carnegie Building, University Park, PA  16802
office: (814) 863-7996; fax (814) 863-8161
home: (814) 867-2545
Web page http://www.personal.psu.edu/faculty/r/m/rmf5/
Faculty profile: http://www.comm.psu.edu/graduate/Frieden_IC.html


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