Jonathan Spalter

Everything Has Changed… But The Rules

How would you assess the success of legislation passed more than two decades ago to promote competition in the local telephone market? You might first ask what the purpose of the statute was and if, in the intervening 23 years, that goal was achieved.

This is precisely the question the FCC has teed up to consider in a draft item on the future of “unbundling and resale” rules enacted as part of the 1996 Telecom Act.

The current rules require incumbent local exchange carriers – regulatory speak for America’s facilities-based carriers – to unbundle and resell access to parts of their networks at below-market rates set by regulators. Congress devised these rules to break open the 1996-era marketplace when incumbent companies dominated the local telephone market.

Just writing ‘local telephone market’ feels strange given how far we have come, but that was the purpose of the 20 century unbundling rules.

So, has it succeeded? Yes.

Local telephone markets required to unbundle and resell networks at below market rates

Since the adoption of these mandates, there has been a precipitous decline in ILEC local voice subscriptions: 186 million in 2000 to about 35 million in 2018. Today, only 11 percent of U.S. households have an ILEC local voice line.

In fact, 60 percent of Americans have abandoned wireline voice service altogether. Of the remaining 40 percent, a majority get service from a non-ILEC, typically cable or voice over internet protocol.

Competition within the broadband market is also fiercely competitive. ILECs provide about 20 percent of high-speed residential broadband subscriptions, and the enterprise market is equally competitive.

Translation: competition has arrived – especially in urban markets and for business applications. (More on that later).

So why does this matter?

Because the FCC is seeking comment on whether network sharing rules that apply exclusively to ILECs still belong on the books.

Defending the status quo are competitive local exchange carriers that buy the unbundled network elements from incumbent providers at government-set rates – even in areas where other providers have deployed networks actively competing with ILECs (and without a government handout).

Two points about the FCC’s proposal to modernize the unbundling rules:

First, there is no rational argument in 2019 to subject incumbent wireline providers (who face stiff competition from a range of competitors and technologies) to outdated and intrusive rules that do not apply to other providers. These rules inhibit the transition to next generation networks by adding unnecessary costs and disincentivizing new competitive network deployment.

Remember, unbundling regulations were supposed to spur facilities-based competition (mission accomplished), not provide discount access rates to competitive carriers in perpetuity after competition arrived.

Second, and notwithstanding USTelecom members’ historic and enduring commitment to connectivity and fiber deployment in rural America (greater than any industry segment, by far), the FCC is proposing to update the rules in areas where ILECs are subject to competition from providers not dependent on unbundling subsidies. In short, no rural customers are at risk of losing service from the FCC’s reasonable proposal to bring unbundling requirements into the 21 century.

The FCC is proposing to limit relief to urban census blocks and to specifically exempt network elements used to provide residential broadband service in rural areas. Look it up, it is on page 16. This is important because, in urban areas, competition is especially fierce – more than 97 percent of urban housing units have access to cable broadband service in addition to a wireline internet service.

At USTelecom, we are all about building bridges to broadband with network infrastructure that has brought the power of connectivity to hospitals, schools and small businesses everywhere; that links the global digital economy; and sets the stage for 5G and other next generation technologies.

Maintaining price regulation on incumbent companies in areas already subject to competition will not speed this progress; it will do the opposite. For this FCC, modernizing regulations on behalf of consumers has always been a key mission, and the unbundling fix falls squarely under that rubric.

Everything has changed since 1996.

Real competition has arrived.

The marketplace is dynamic.

The consumer experience is leaps and bounds better.

Technology has transformed our lives and evolved again… and again.

Everything has changed. Everything but the 1996 rules.

It’s time those changed too.

This article originally appeared as an editorial in Multichannel News