IP: This titel is the CATOs "Supreme Court Upholds Forced Access, Stifles Market Competition"

[Dave Farber <dave () farber net>]

See comment from Gerry Faulhaber at end djf

From: Einar Stefferud <stef () nma com>
Date: Tue, 14 May 2002 10:35:14 -0700
To: Dave Farber <farber () cis upenn edu>
Subject: Supreme Court Upholds Forced Access, Stifles Market Competition

Excerpt: Cato Daily Dispatch - May 14, 2002

Supreme Court Upholds Forced Access, Stifles Market Competition


The Supreme Court handed a huge victory to start-up telephone companies
yesterday by broadly affirming rules that force large phone companies to
lease equipment to them at a low cost, according to The New York Times.
( http://www.nytimes.com/2002/05/14/business/14BIZC.html )

The price controls are meant to let rivals compete with the local phone
companies by leasing access to their networks at a below market rate,
rather than having to build their own systems. Although local telephone
competition has been slow to catch on for a variety of reasons, rivals
have blamed the "intransigence" of the dominant local companies.

Cato Director of Telecommunication Policy Studies Adam Thierer had the
following comments on the ruling:

"The Supreme Court's ruling in Verizon Communications v. FCC rejects
markets in favor of mandates. The decision is based on Romper Room
economics: sharing is better than competing.

"The ruling will allow the FCC to continue to treat the telecom sector as
its regulatory plaything and allow federal bureaucrats to micromanage the
industry through a complex arsenal of network mandates and price controls.

"At a time when the nation desperately needs more investment and
innovation from the telecommunications sector, the Supreme Court's ruling
endorses the FCC's disturbing regulatory approach, which encourages
potential rivals to seek access to existing networks instead of deploying
new and better systems of their own. Thus, the court's ruling sends an
alarming signal to potential rivals and investors by encouraging them to
first look to government to gain access to archaic existing networks
instead of building their own facilities-based infrastructure to square
off against incumbent carriers.

"As a result of this decision, regulators will spend many more years
gaming the system to encourage artificial market entry by small carriers,
who are doing little more than hitching a free ride on older networks. The
better solution would have been to reject the current command-and-control
regime of access mandates and price controls in favor of market pricing
and voluntary contracts. Investment and innovation will suffer as a result
of the court's misguided decision."
--------------------------------------------------------------------------
Jerry Brito, editor, jbrito () cato org
--------------------------------------------------------------------------
http://www.cato.org/dispatch/05-14-02d.html


------ Forwarded Message
From: "Faulhaber, Gerald" <faulhabe () wharton upenn edu>
Date: Tue, 14 May 2002 14:01:54 -0400
To: "'Dave Farber'" <dave () farber net>


Cato's point of view is pretty extreme.  The Supreme Court's ruling
basically states that the pricing standard the FCC has been using for
Unbundled Network Elements (UNEs) is just fine, and it can continue to use
it to implement Congress' Telecommunications Act of 1996, just as it's been
doing for the past few years. Congress had in mind a way to reach
competition even with the RBOC's monopoly of the local access line. If Cato
doesn't like the Congressional mandate of the 1996 Act, well, go see
Congress.  The FCC is simply implementing the mandate.

Will this have much of an effect?  I think not.  With few exceptions,
offering local service using RBOC facilities has not been a very good
business model, for a variety of reasons.  This Supreme Court ruling will
not change that situation at all; it's still not a good business model.

Professor Gerald Faulhaber <http://rider.wharton.upenn.edu/~faulhabe>
Business and Public Policy Department
Wharton School, University of Pennsylvania
Philadelphia, PA 19104



For archives see:
http://www.interesting-people.org/archives/interesting-people/