Say you want to be a grocer. You invest in a building, shopping carts, refrigerators, cash registers, the works. Then, the government decides your town needs more competition. But, instead of encouraging others to build grocery stores, regulators order you to give would-be competitors access to your shelves and your inventory at prices that do not cover your operating costs.
Is the result greater competition? Not really. Customers get no more real choice, and any price break is not economically sustainable.
Change grocery stores to phone companies, and you have today's telecom debacle. Regulators have forced incumbent local telephone companies to piece out their networks at below cost.
Now, New York and California are making these uneconomic discounts even more severe: punishing companies that build up the nation's telecom network and rewarding those that don't. After all, why build your own store when you can use a rival's for less?
It's bad policy for the nation. The actions of New York and California further divorce the ailing telecom market from economic reality and discourage needed investment in the nation's telecommunications infrastructure. It's a surefire path away from real competition, should other states follow their misguided lead.
Competition in name only does nothing to help consumers. In fact, today, the primary sources for such competition for the mass market are outside traditional phone networks � from wireless and cable companies. For example, in a USA TODAY poll, 18% of cell phone users considered their cell phones to be their primary phone line.
With the days of easy capital behind us and an era of rising competition from cell phones, cable and the Internet ahead, the economic pressures on local phone companies are significant.
Much has been written about failures in the telecommunications industry. Among the first to go were those who didn't create real value by investing in their own networks. Current regulation encouraged that approach.
We cannot change this recent past, but we will suffer as a nation if we fail to learn its primary lesson: When public policy is based on nothing more substantial than economic wishful thinking, in the end � nobody wins.
This has got to be one of the most vague and non-descript articles I've ever read about the telecom industry. Sounds like it's written by someone who has a regular subscription to Time magazine. If your a true Telecom Analyst, you can do better than this.
This guy has no clue about the telecom industry. The Powers that be have "forced" the RBOCS to give up the store to the competition, and the RBOCs are still in Business, but one of our major competitors, mci, part of wcome, is going under. This was one of the companies that brought the Bell System inot court in the first place. They wanted into the telecom industry, used the courts to get into it because they couldn't do it on thier own and they failed. But, you wouldn't know about that.
Thanks, I will pass your critique on to Walter B. McCormick Jr. He is the guy who wrote the article. He is president and CEO of the United States Telecom Association. He wrote the article for USA Today. He actually describes it perfectly.
Very good article. It shows how the Republican lead Enronization of the American economy is not only screwing the telecom industry, but everyone. Enron proved what unregulated middlemen do in energy: suck out money from consumers while adding no benefit. Hope the same will not happen to telcos and SBC.