The National Cable & Telecommunications Association (NCTA), the cable television industry’s top lobbying group, announced recently that Michael Powell, Chairman of the FCC from 2001 to 2005 had been hired as a CEO of the organization. My initial reaction was a cynical “hmmph” that another public servant in charge of regulating an industry was going to work for the companies they had been charged with regulating on behalf of consumers. It happens all the time right? But Michael Powell was not just an average bureaucrat that quietlycollected a paycheck for a few years before heading back off into private industry. Powell successfully lead the most significant effort to destroy telecommunications and broadband competition in the U.S. in modern history through the FCC’s Triennial Review Order in 2003 and subsequent Triennial Review and Remand Order in 2004, essentially cementing the cable/Bell Telephone duopoly that controls the residential telecom market in the U.S. It wouldn’t have been a big deal if he went directly into the group when he left the FCC in 2005 because history hadn’t yet separated the spin on his actions from reality. Now that we have seven years of history to look at, seeing Michael Powell going to work for the NCTA looks a lot like seeing Sheriff Rosco P. Coltrane report in to the nefarious Boss Hogg after a day spent harassing them good ‘ol Dukes of Hazzard.
According to the FCC’s site “The competitive framework for communications services should foster innovation and offer consumers reliable, meaningful choice in affordable services.” Powell’s FCC released “deregulations” that rolled back hugely significant portions of the local competition provisions of the Telecommunications Act of 1996 under the guise of removing the barriers that were preventing the local Bell telephone monopolies (Verizon and ATT here in California) from making large investments in new, competitive, innovative services. The idea pitched by Powell and the other two Republican appointees on the FCC was that if we removed the pesky competitors from the equation, the Bells would then be free from providing discounted wholesale services and would go on building and hiring sprees. Among the most significant de-regulations:
Regulatory Change: Forbid competitive DSL carriers from splitting a customers existing phone line to provide DSL while the phone company continued to provide phone service.
Effects: This forced competitive providers to purchase an entirely separate phone line to provide DSL, artificially inflating the cost. The competitive broadband providers attempting to provide residential service stopped providing their own DSL circuits to the customer premise and were forced to buy the Bell company’s ADSL lines at essentially the same price that the Bell company sold it directly to consumers, and then provide their services across it. A few brave souls stuck it out on a regional basis and continued to provide residential DSL services under that mechanism, but it essentially reduced the field to the cable monopoly and the Bell monopoly in the U.S. Oh, and that massive network build out we were told would happen? Residential DSL availability and speeds are pretty close to exactly the same as they were in 2005.
Regulatory Change: Allowed the incumbent Bell telephone companies to stop selling switched access lines to competitors. The original rule was designed to offset the 100 year advantage the original monopolies had and allow competitive carriers to resell complete telephone services from the incumbent monopoly until they built big enough customer bases to justify purchasing their own switching.
Effects: According to a fascinating presentation by David Brevitz, in June 2004 there were 17.1 million resold switched access lines (known as UNE-P). That’s a small chunk of the U.S. market, but it was getting into some real numbers that would almost signify competition. ATT and Worldcom were long distance companies that were the largest providers of UNE-P in 2004. Powell’s theory was that they had enough of a chance to gain market share and would suck it up and install their own switches if he pulled the rug out from under them (more of the promised building spree the rule changes were going to create). Both companies were forced to abandon providing residential local telephone service, and since the Bells had been allowed to get into the long distance business and compete for their customers, they were suddenly left with dim prospects for survival. ATT was subsequently purchased by the incumbent Bell company SBC, with the overall company taking the ATT name. Worldcom (MCI) was acquired by incumbent Bell company Verizon. And just like that the two biggest competitors to the local Bell monopolies were gone. No building spree, no enhanced competition, just round after round, year after year of layoffs.
Regulatory Change: Prevented competitors from being able to provide services across the incumbent phone company’s fiber to the home.
Effects: You already know this one. You don’t have fiber (other than what’s in your cereal), and you aren’t going to get it any time soon. If you are one of the few that does have a fiber option, the chances of you having an option to buy it from a company other than one of Powell’s duopolies is somewhere between slim and none. In fact, odds are you’re paying a portion of Powell’s salary now, just like the good old days when he was running the FCC.
This time around, Roscoe P. Coltraine caught those Dukes, locked ‘em up and threw away the key. Dissenting Democratic Commissioner Michael Copps’ statement in 2004 has turned out to be amazingly prescient:“What we have in front of us effectively dismantles wireline competition. Brick-by-brick, this process has been underway for some time. But today’s Order accomplishes the same feat with all the grace and finality of a wrecking ball. No amount of rhetoric about judicially sustainable rules and economically efficient competitors can hide the blockbuster job this Commission has done on competition. During its tenure, the largest long distance carriers have abandoned the residential market. And as a result of today’s decision, other carriers will follow suit. In their wake we will face bankruptcies, job losses and customer outages. Billions of dollars of investment capital will be stranded. And down the road consumers will face less competition, higher rates and fewer service choices.”