IP: Furchtgott-Roth Speaks Out on Policy, Markets

[David Farber <dave () farber net>]

> From: Dewayne Hendricks <dewayne () warpspeed com>
>
> Furchtgott-Roth Speaks Out on Policy, Markets
>
> Summary:
>
> Speaking at a recent American Enterprise Institute (AEI) educational 
> seminar, former FCC Commissioner Harold Furchtgott-Roth spoke openly about 
> the telecommunications market and its seemingly sudden demise. As always, 
> Furchtgott-Roth was frank about current economic conditions, calling the 
> economic slowdown an "inevitable" event many years in the making. In 
> addition, events of September 11 and the overall market recession have 
> exacerbated matters dramatically. In this comments below Furchtgott-Roth's 
> gives opinions on this topic as well as his views on the NextWave debacle, 
> the collapse of the fixed-wireless market and pending issues before the FCC.
>
> Selected Comments:
>
> "There is no doubt that terrorism has damaged consumer and investor 
> confidence, and that the national economy is slowing down and sliding into 
> a recession," says Furchtgott-Roth. "The telecom sector is small in 
> proportion to the rest of the economy, but it does make up a 
> disproportionately large portion of equity spending and note issues. The 
> tech market slowdown definitely preceded the national slump due to 
> systematic problems that would have happened independently of a national 
> economic slump. The national slowdown has just exasperated the situation.
>
> "In terms of cost structure, part of the problem is regulatory 
> uncertainty. This has damaged all aspects of the telecom market because it 
> makes costs unpredictable. Uncertainty also has caused the cost of capital 
> to go up. Companies now are raising money by any possible means."
>
> --Furchtgott-Roth Takes On the NextWave Settlement
>
> "I'm very puzzled by the NextWave issue. Any time there are closed 
> negotiations between private parties and the FCC, I get very nervous. What 
> has happened to procedure? Who are the real parties of interest? How are 
> they operating?
>
> "These licenses are NextWave's, according to the law. They can do whatever 
> they want with them. If NextWave wants to sell, they can. Having a third 
> party such as the FCC working to influence an outcome is just bizarre.
>
> "The FCC did a very bad job auctioning these licenses, and it made the 
> mistake of making itself a creditor. This is bad lawyering on the part of 
> the government. Litigation has been pursued in a haphazard and prejudicial 
> way. NextWave was not the only designated entity to file for bankruptcy. 
> However, most were not pursued at all. The FCC went after NextWave with a 
> vengeance. NextWave may have been the biggest violator, but that should 
> not be the only justification for a legal case. The FCC made this problem, 
> and the way the government got involved in this matter is just unbelievable.
>
> "The fact of the matter is that auctions cost money. It costs billions for 
> a license and then tens of billions to build out facilities. That takes 
> access to a lot of capital. This is just not a mom-and-pop operation, and 
> these licenses are just not for smaller companies. There are plenty of 
> licenses for smaller markets that require a lot less capital."
>
> --Furchtgott-Roth on Fixed Wireless
>
> "Teligent and Winstar have failed; AT&T and Sprint have exited the market. 
> Fixed wireless was a promising technology with a solid business plan and a 
> lot of financial backing, but there were implementation problems.
>
> "There may be a market for fixed-wireless technology in 10 to 15 years, 
> but it clearly won't happen anytime soon. This should not be considered a 
> market failure; this is just how the market works. Some technologies and 
> business plans work, and some just don't. The key to a free economy is the 
> freedom to enter the market unencumbered and the freedom to exit the 
> market unencumbered."
>
> --Furchtgott-Roth on Technology and the FCC
>
> "The FCC has no concept of how markets work or how property rights work. 
> There are companies that come to the commission with new technologies all 
> the time, and all they need is spectrum. However, they must play the game 
> of 'Mother, may I?' and spend time and millions of dollars to persuade the 
> commission their technology is viable. The fact is, most innovations never 
> get developed because of this. You have to wonder why any company would 
> bother to go through this.
>
> "The FCC essentially asks companies to demonstrate their technology -- 
> their proprietary technology - [then] reveal their business plan and then 
> wait for the FCC to freely auction off spectrum that will be devoted to 
> that proprietary technology.
>
> "We need to start treating spectrum like property. Everything would be 
> sorted out under this model. The commission doesn't like that plan because 
> they want to protect competition and prevent interference, but property 
> rights don't give owners carte blanche to do anything under the sun. 
> However, it does give the owner the right to [retain] some uses."


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