Food goes bad when left on the shelf long after its sell-by date. Similarly, monopoly-era regulations become harmful when left in place long after market conditions become competitive. Dominant carrier regulations for incumbent voice providers are way past their sell-by date. The FCC needs to remove them.
Dominant carrier regulations were designed for 20th Century monopoly-era copper-based telephone services. They were designed for incumbent local exchange carriers (ILECs), which were typically a consumer’s sole provider of telephone service. But recent data overwhelmingly evidences the competitive state of the voice services market. This makes dominant carrier regulations unnecessary to ensure competitive choice for consumers. They impose needless compliance costs that detract from provider investment in next-generation IP-based technologies. The Commission ought to declare ILECs to be non-dominant right away.
Last week public comments were filed at the FCC to refresh the record in its proceeding on the regulatory treatment of ILECs. Specifically at issue are dominant carrier regulation of interstate mass market and enterprise switched access voice services.
Three years ago, FSF President Randolph May and I filed comments insisting that relief from dominant carrier regulations were long overdue. We cited data, principally from 2011, showing continuing increases in interconnected VoIP subscriptions and precipitous declines in switched-access lines. Based on that data, both businesses and residential customers clearly had choices between incumbents and competitors – not to mention wireless voice providers.
Even by 2013, developments in the voice services market made a clearly strong case for relief from dominant carrier regulations for ILECs even stronger. Between 2011 and 2013, ILECs' nationwide market share of wireline business customers dropped from almost 61% to 55%, while competitors' share of business customers grew from just over 37% to over 44%. Also between 2011 and 2013, ILEC market share of residential customers dropped from over 63% to just over 57%, while competitors' share grew from just over 36% to nearly 43%. Keep in mind that in the AT&T Non-Dominance Order (1995), the Commission granted relief from dominant carrier regulations for long-distance voices services when AT&T's market share declined to 55.2% for revenue and 58.6% for minutes.
Of course, 2013 data is hopelessly out of date. Competition and innovation trends from 2011 to 2013 have certainly continued. As if wireline competition numbers weren't enough, consider also 2015 data concerning wireless voice services. The latest National Institutes of Health survey on wireless substitution found that "[i]n the first 6 months of 2015, nearly one-half of all households (47.4%) did not have a landline telephone but did have at least one wireless telephone." A wireless industry survey puts the total number of mobile connections at a staggering 355.4 million.
Despite this conclusive evidence that ILECs are no longer dominant the Commission has declined to take any action. There is no good reason for continuing delay. Hopefully, an updated record that reflects competitive market changes up through early 2016 will finally push the Commission to relieve ILECs of those unnecessary and costly regulations. As FSF's Comments in this proceeding maintained, the Commission should make a nationwide finding that interstate mass market and enterprise switched access voice services are presumptively competitive. And should actual evidence of market power or lack of choice in a particular geographic spot be presented to the Commission, it could then target that spot for remedy.
The Commission must finally put an end to the regulatory relics of 20th Century telephone services, including dominant carrier regulations. Those outdated rules, including dominant carrier regulations, do not help consumers. They only divert resources away from the ongoing upgrades to better-performing IP-based networks. Until the Commission removes them, those unnecessary and costly regulations will delay successful and efficient completion of next-generation technology transitions.