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data is hopelessly out of date.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.
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