|
|
|
|
 |
|
|||||||||
|
|
|
 The Wall Street Journal, September 16, 1997 Don't Crush Wireless Innovation
In the next few weeks the Federal Communications Commission will decide whether the U.S. telephone industry unleashes a new birth of competition, entrepreneurship and innovation. When Congress completed last year's comprehensive revision of telecommunications legislation—the first in 60 years—pundits foresaw a flowering of new services in the telecommunications marketplace. The Baby Bells were to take on the long distance companies, which in turn were to enter the local phone markets; and both were to barge into cable television services, already beset by direct digital satellite. In this garden of competition, a thousand flowers were to bloom. Briar Patch of Rules A little more than a year later, as Frank Gregorski and I predicted on this page, the garden is still bare. The 780,000 words of "deregulation" turned into a briar patch of new rules to be manipulated by the established telephone companies and their allies in the communications bar. Meanwhile, the regional Bell operating companies" investment in their own networks collapsed under the perverse Telric standard (the acronym stands for "total element long-run incremental costs"), limiting what telcos can charge rivals to link to the network or co-locate in the regional Bells' central offices. Congress's standard of "competition" effectively meant that no one could win, or even make any money. Rather than invading one another's turf or upgrading their networks, therefore, long-distance and local-exchange companies have turned to consolidation, the strategy behind the aborted alliance between AT&T and SBC Communications, while MCI sold out to British Telecom. Meanwhile other "locals," such as SBC-Pacific Telesis and Bell Atlantic-Nynex, have expanded their monopoly territories by merging rather than by competing with one another. Instead of seeking new fields of competition, most of the old, wire-based systems have retreated to the familiar domains of the copper cage—some 48 million tons of metal wire that they have implanted across the country over the past 100 years, and that gives them their local dominance. The real hope for competition in the local loop is wireless entrepreneurs providing so-called personal communications systems. The ultimate PCS market is not among current cellular customers, but among the one billion wire-line customers in rich countries and the several billion potential phone and computer customers around the globe. In pursuing them, new wireless technologies will release torrents of new demand and new revenues; dramatically higher volumes will more than compensate for the decreases in unit prices. Digital wireless services can unleash huge new growth in telephony, using the electromagnetic spectrum in all its various forms. Now, however, the FCC is in grave danger of aborting this competition as well. Four years ago, Congress granted the commission authority to auction parts of the broadcast spectrum, giving specific instructions to encourage new entrants to participate in the wireless communications industry. In response, the FCC scheduled the so-called C-Block auction, limiting participation to new entrepreneurial companies and permitting successful bidders to pay over 10 years. The auction finished on May 6, 1996, amid the euphoria of the Telecom Reform Act enacted a few months earlier. As hoped, a hardy band of entrepreneurs competed aggressively in the bidding, driving prices to more than 2.5 times those paid earlier by the big wire-based players. Then the trouble began. The FCC took more than a year to complete its licensing of these upstart competitors, giving incumbent wireless-service providers a more than two-year head start. Then the FCC permitted broadcasters virtual carte blanche in their use of their huge grants of free spectrum and anointed special mobile radio companies (formerly dispatch services for taxis, ambulances and other services) as full-fledged cellular players. At the same time, Congress determined that spectrum auctions should be a panacea for the budget crunch. And so it mandated that the FCC dump huge new spans of spectrum on the market, through an array of at least eight previously unanticipated new auctions. Although the Congressional Budget Office projected that these transactions would yield the awesome sum of $40.7 billion, in fact the mere announcement crashed the market. The so-called Wireless Communications Service auction in April saw licenses in St. Louis, Minneapolis, Milwaukee, Des Moines, Iowa, and Omaha, Neb., go for just $1 per person—a fraction of 1% of the value of previous licenses. The result was to devalue the licenses the PCS entrepreneurs had won only a year earlier, in some cases to less than one-third of what they had been worth. This crippled the PCS licensees' ability to borrow against the value of their new property to build their innovative networks. | ||||||||
