Verizon is not leaving an economic union but instead the community of companies who believe in investment and facilities-based competition, particularly in the business data services (BDS) market, now the subject of proposed FCC price regulation. And it appears the company is also abandoning certain long-held economic principles, as well.
Since 2003 -- a virtual eternity in the fast-paced world of telecom -- Verizon has staunchly advocated for investment, deployment of fiber, and facilities-based competition. Verizon's once-visionary leadership coined the phrase 'new wires, new rules/old wires, old rules' used by the FCC to create pro-fiber investment policies that helped spur the deployment of its modern high-speed broadband network. The "Fi" in FiOS, a central part of Verizon's corporate strategy and broadband buildouts -- stands for fiber, after all.
Yet Verizon now trumpets a deal with the competitive local exchange carrier (CLEC) trade association INCOMPAS that favors price regulation in the BDS market. Why the sudden change? Some might suggest that Verizon's proposed mergers currently pending before the FCC and other government agencies might be the reason why the company is now simply driving 55 past the speed trap giving a friendly wave to the regulatory cops.
But there's another likely reason: In a highly regulated environment, it can be tempting to let regulators determine outcomes in markets rather than doing the hard work of competition.
This was made clear in a recent ex parte filing at the FCC in support of the INCOMPAS/Verizon call for intrusive price regulation. It describes this effort as "a rare achievement that is a culmination of years of hard work and recent compromise from diverse interests-wireless providers, backhaul providers, competitive providers, incumbent providers, and international providers-working together to provide a balanced solution to an issue that has plagued the industry for numerous years." It should also help the Cubs win the World Series for the first time since 1908.
It's everything, in short, a regulatory agency could want - except a firm reliance on the very facilities-based competition that will drive fiber investment and actual deployment of BDS to the businesses and institutions that need it most. Instead, as growing purchasers of BDS, INCOMPAS companies now seek to slash their competitors' returns to accelerate a 'lease over build' deployment strategy.
Rather than promote capital investment, INCOMPAS companies find it easier to adopt the DC fashion of the day -- seeking regulation for one's competitors. To paraphrase Senator Russell Long's famous line about tax lobbying, don't regulate you, don't regulate me; regulate that facilities-based competitor behind the tree.
The danger associated with service providers seeking regulation of their competitors is clear. It distorts markets. It undermines investment. And it reduces competition, which hurts the economy.