The Tech Transitions:

Competition Genesis, Competition Future

Chip Pickering
Jul 23, 2015 · 5 min read

By Chip Pickering
CEO of COMPTEL

Last week FCC Chairman Tom Wheeler was asked what the FCC was doing to help the middle class with broadband issues. His answer: competition, competition, competition.

The Chairman quickly pointed to an item scheduled to appear on the agenda for the upcoming August 6th meeting, the tech transitions, as a critical component for helping small businesses and the middle class — with price, choice and access.

The technology transitions offer significant benefits to consumers, business customers and non-profits of all sizes. New technology enhances their ability to simplify their networks; transport critical business data securely and reliably among multiple office, branch, store, or campus locations; support high-bandwidth applications at a lower cost; and scale bandwidth as their businesses grow.

The tech transitions have been on Wheeler’s radar since his very first address as FCC Chairman at his alma mater of Ohio State University in 2013. Since then he has built momentum and bipartisan support for these issues. Last year, in a 5–0 vote, a unified FCC coalesced around a series of core network principles to guide the tech transitions conversation that included: public safety, consumer protection, competition, and universal service.

Then, last Fall, in a keynote address before the COMPTEL show in Dallas, Wheeler summed up his position: “Let me be clear: transitions to IP are not a license to limit competition.”

As pointed out in the Wall Street Journal and Bloomberg BNA, action on tech transitions will ensure smaller, competitive broadband carriers have access to networks at reasonable rates. But the issue was best summed up in this story by Fierce Telecom which observes that competitors need last mile access to the telcos’ networks that are ubiquitous:

“ Without ensuring competitive choice, the real losers in these transitions are the small businesses that need communications services to run their daily operations.” — Fierce Telecom

So as the FCC gears up to vote on the tech transitions proceeding, here are some key points:

The Genesis for IP Transition was Competition:

The introduction of Ethernet and other IP-based services to incumbent telco networks are the result of competitive pressure from competitors innovating and challenging the 100 year old monopoly networks of the Bell system. IP networks, first introduced by competitors, were both faster and more efficient. New network growth in IP has been impressive.

In fact, one competitor, Level 3, in just over 15 years’ time has built the nation’s second largest network of enterprise Ethernet circuits — even though the two bigger Bell companies have hundreds of billions more in market capital for investment.

Technology Neutral:

At a physical level, networks — both old and new — are blind to the higher-level technologies needed to communicate over them. Innovation in service has to do with the transition in technology, from the rigidity of TDM to the flexibility of IP. It has nothing to do with whether the facility is copper or fiber. The FCC highlights a point that is often missed: IP services can be offered over fiber or copper.

Importantly, the need to reach the customer through wholesale last mile access services is not altered by either the transition in technology or the transition from copper to fiber facilities. Thus, by including reasonably comparable wholesale access provisions in a technology neutral tech transitions Order, the FCC will take an important step to ensure competition continues across all technology networks and platforms.

Business Customers:

Businesses from across the nation, including small corner shops and national retail chains, have taken advantage of competition policy. For some, it’s about affordability. For others, it’s about access for multiple locations — be it a bank with branch offices around town, or a restaurant with chains located in all 50 states. Customers have spoken about how they like competitors’ innovative offerings and personal customer service.

Recently industry associations representing over 150,000 gas station and convenience stores, 70% of all the electricity providers powering homes and businesses throughout the country and security companies delivering safety and protection in every community joined COMPTEL on this issue. The bottom line — to disconnect competition now would cause damaging disruption throughout our economy and would be extremely irresponsible to do so.

A network upgrade shouldn’t be an excuse to raise prices, or cut off network connections that work for customers. In addition to the U.S. Small Business Administration’s Office of Advocacy, hundreds of businesses (both large and small) have asked the FCC to protect their ability to choose a competitive provider during and after the tech transitions.

As I have written, the customer is always right, and to hear theses business stories don’t miss our Customers 4 Competition page.

Market Driven Affordability, Not Price Caps:

Affordability has always been at the center of communications policy. As we have seen, competition is the best way to drive down prices, while protectionist policies that favor monopolies or duopolies are a sure-fire way to send prices higher.

While the Bells have recently cried foul over protecting and promoting competition in the tech transitions, it’s important to remember a few things.

First, the Bells aren’t giving access to their networks for free. The wholesale market is a multi billion-dollar revenue generator for the Bells. Second, AT&T’s approach to replacement products for the wholesale market in the transitions has been telling. They started by asking for significant price hikes on high capacity broadband lines — lines that power things like ATM machines and gas pumps which would have stung consumers in the wallet. Then, during their IP trial they casually listed a significant part of the wholesale market as “TBD –To Be Determined”, in documents. Two huge red flags.

One broadband company, Windstream, is not only a competitive provider, but also the nation’s fifth largest incumbent provider. They recently took issue with AT&T’s arguments against competition on tech transitions.

If the tech transitions are simply viewed as a ploy to raise prices and eliminate competition the nation will miss a huge opportunity to advance our economy forward.

A New Networks Necessity:

As detailed in this great piece from XO Communications CEO Chris Ancell, action on tech transitions is an important step in continuing the development and construction of new networks by companies that rely on longstanding bi-partisan competition policy.

All networks need to connect. It’s a core element of free market principles. The technology transition is an evolution in the networks not unlike other changes to networks that that have taken place in the past century. With competition policy as a guide, consumers have a bright future.

Chip Pickering

Written by

CEO of INCOMPAS, Former Member of Congress (R-MS), Teacher at Ole Miss, Dad of 5 boys

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