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FCC Declines Foray Into Known World of Telecom

July 30, 2007 , , ,

Buried deep on the cheery financial results for Verizon earlier today was one figure of which the FCC should take note: The company had $844 million in wholesale revenue in the second quarter of this year.

The company already has a modest number of wholesale wireless customers, although the revenues aren't broken out separately as they are on the wireline side. Those figures alone, shown in Verizon's financial news release and accompanying materials should be further proof that the FCC is being somewhat timid in backing away from a wholesale concept for the 700 MHz auction. Requiring open access, including wholesale, isn't a venture into the unknown. It's a validation of the known.

But wait, there's more. It turns out that AT&T is bidding on contracts for municipal wi-fi systems that require open access. Greg Richardson at Civitium shows that local governments with wi-fi networks want them to be open, and AT&T is willing to go along. Richardson shows that in St. Louis, AT&T agreed to a provision. A similar provision is in place with Riverside, CA.

Why then is the Commission shying away from it? After all, there does seem to be some consensus that competition is needed to the telco-cable duopoly. The 700 MHz auction isn't the whole answer, but it's part of it.

The Bells are fond of waving the threat of the unknown in the face of those who would mandate open access. The threat is that all of these conditions would drive down the revenues for an auction. Apart from the fact that revenues by law aren't supposed to be a goal of the auction, that measurement also can be challenged.

A group of economists earlier today sent a letter to John Kneuer, head of the National Telecommunications and Information Administration (NTIA) to refute testimony he gave to the Senate Commerce Committee last week. At a hearing on the digital TV transition, Kneuer argued for “maximum flexibility” for the auctions.

Four auction-theory economists disagreed, telling Kneuer that “In fact, the open access, wholesale, and designated entity provisions currently under consideration by the FCC are likely to increase auction revenues.” The economists are consultants to Frontline, which has argued for wholesale access.

“Maximum flexibility” is just another term for allowing the Bells to have their way. Maximum it may be, but flexible – definitely not. Consumers will undoubtedly see some benefits from the FCC's decision tomorrow on the auction rules – increased use of cell phones in the designated band is one. But it would be a shame if the Commission backed away from the known world in which wholesale is an accepted practice and prevented something new from coming into existence.