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America's Telecom Policy Is Stuck in the 1990s

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By Bruce Mehlman

NEW YORK (TheStreet) -- Coming out of the Mobile World Congress in Spain, headlines such as "Europe Is Strangling the Telecom Industry" paraded across news outlets.

According to the reports, European regulators are saddling telecommunications firms with additional heavy-handed price mandates that have slowed investment in next generation, high-speed broadband networks. The current regulatory landscape in Europe has forced many companies to cling to dead-end business models built on outdated, slower technology. As a result, Europe has an overcrowded market with too many telcos unwilling or unable to invest in state-of-the-art, IP-enabled networks. They are in essence starving the broadband future.

Sound familiar? It should. Our nation is facing a similar challenge today with the transition to all-Internet Protocol (IP) networks. Competitive Local Exchange Carriers (CLECs) and their allies demand that America's outdated regulatory framework governing Plain Old Telephone Service (POTS) must remain in place in perpetuity. Many even push to extend POTS regulations to the all fiber-based networks that have thrived and proliferated precisely because they are free from such mandates. Talk about stuck in the 1990s.


Currently, CLECs are afforded access to incumbent carriers' TDM-based networks at reduced government-regulated rates, pursuant to the 1996 Telecommunications Act. Such favorable treatment was intended to give new entrants a running start, a base upon which they might invest in their own networks and build out competing infrastructure. Indeed, policy makers' explicit goal at the time was to create more robust competition in the telecommunications marketplace for both residential and business voice services. It was thought that by allowing the competitors to use the networks of incumbents and to pay a deeply discounted rate for network access, so-called TELRIC pricing, CLECs would rapidly acquire customers, enjoy revenues and soon be able to build their own infrastructures.

It hasn't quite worked out as Congress intended. Unfortunately, too few CLECs actually deployed competitive networks of their own, preferring instead to leverage their rate-regulated access to Incumbent Local Exchange Carrier (ILEC) infrastructure while targeting mostly business customers with lower-cost alternatives enabled by lower overhead. Residential consumers rarely receive any benefit from the competitive services most CLECs offer. Easy profits if you can get them, but hardly rules to encourage deployment of upgraded, competitive broadband networks.

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