The Politics of Bandwidth: Convergence, Globalization and the Future  of Telecom Regulation Glenn B. Manishin, Esq. Patton...
Overview <ul><li>Public Policy in the Convergence Era </li></ul><ul><li>Network Scale and Market Concentration </li></ul><...
Public Policy in the Convergence Era <ul><li>The Cycles of Convergence </li></ul>19 Septemer 2000 Glenn Manishin <gmanishi...
Technical Factors in Convergence <ul><li>Commoditization of transport </li></ul><ul><li>Integration of IP </li></ul><ul><l...
Policy Uncertainty of Convergence <ul><li>TA96 — avoiding complexities </li></ul><ul><ul><li>Political issues dumped on re...
The Regulatory Impact of Convergence <ul><li>Who regulates? </li></ul><ul><li>What is regulated? </li></ul><ul><li>How is ...
Network Scale and Market Concentration <ul><li>Big fish in little ponds </li></ul><ul><ul><li>End user pressure for global...
Regulatory Leverage in Concentration <ul><li>Out-of-region RBOC entry obligations </li></ul><ul><li>OSS/271 conditions </l...
The Policy Inversion of Concentration 19 Septemer 2000 Glenn Manishin <gmanishin@pattonboggs.com> USTA NSAC #51 Atomistic ...
The Regulatory Trilogy Redux <ul><li>Interconnection, universal service and access charges </li></ul><ul><ul><li>1996 Act ...
Interconnection in the Convergence Era  <ul><li>UNEs, UNE-P and resale </li></ul><ul><ul><li>Federal/state dichotomy creat...
USF in the Convergence Era <ul><li>USF, costing and social engineering </li></ul><ul><ul><li>Existing structure accepts hi...
Access Charges in the Convergence Era <ul><li>Costs, CALLS and “uneconomic bypass” </li></ul><ul><ul><li>Failure of USF co...
Reexamining the Trilogy? <ul><li>FCC and Congress resist fundamental assessment of conflicting policy goals (competition v...
Bandwidth and Internet Everywhere <ul><li>Bandwidth impacts markets and regulation </li></ul><ul><ul><li>Availability incr...
The Bandwidth Dilemma <ul><li>Should new networks be subjected to economic regulation or should legacy networks be deregul...
The Trilogy (Now and Tomorrow) <ul><li>Switched MOU and per-line special access charges </li></ul><ul><li>USF limited to t...
Internet Ubiquity <ul><li>From PDAs to cars to refrigerators </li></ul><ul><ul><li>Standards become competitive battles </...
Beyond the 1996 Telecom Act <ul><li>When will telecom policy evolve? </li></ul><ul><ul><li>The VoIP abyss (1996-?) </li></...
Building a New Paradigm <ul><li>Difficult long-run policy issues take time </li></ul><ul><ul><li>Transitional level playin...
Who Will Build the New Order? <ul><li>Congress satisfied with delegation, oversight and blame-shifting </li></ul><ul><ul><...
The Consequences of Temporizing <ul><li>Network and business strategy lacks predictable policy planning basis </li></ul><u...
Regulatory Uncertainty and Innovation <ul><li>Innovation effects of uncertainty </li></ul><ul><ul><li>Technical developmen...
Back to the Future <ul><li>Future of bandwidth regulation looks like distant past </li></ul><ul><li>Achilles Heel of 1996 ...
Conclusions <ul><li>“ I feel the need for speed” </li></ul><ul><li>Superman and X-Men (Rubber Soul) </li></ul><ul><li>“ If...
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The Politics of Bandwidth: Convergence, Globalization and the Future of Telecom Regulation

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As communications networks produce more and more bandwidth, traditional regulatory classifications and policies no longer work well. This presentation to the United States Telecom Association explored the influence of bandwidth from a political, legislative and public policy perspective. It assessed the impact of concentration, interconnection and federal policies — and the continued failure to modify legacy rules — on competition, consumer welfare and United States global leadership in the communications space. September 2000.

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The Politics of Bandwidth: Convergence, Globalization and the Future of Telecom Regulation

  1. 1. The Politics of Bandwidth: Convergence, Globalization and the Future of Telecom Regulation Glenn B. Manishin, Esq. Patton Boggs LLP 8484 Westpark Drive McLean, VA 22102 703.744.8095 <gmanishin@pattonboggs.com>
  2. 2. Overview <ul><li>Public Policy in the Convergence Era </li></ul><ul><li>Network Scale and Market Concentration </li></ul><ul><li>The Regulatory Trilogy Redux </li></ul><ul><li>Bandwidth Unlimited & Internet Everywhere </li></ul><ul><li>Beyond the 1996 Telecom Act </li></ul><ul><li>Regulatory Uncertainty and Innovation </li></ul><ul><li>Back to the Future </li></ul>19 Septemer 2000 Glenn Manishin <gmanishin@pattonboggs.com> USTA NSAC #51
  3. 3. Public Policy in the Convergence Era <ul><li>The Cycles of Convergence </li></ul>19 Septemer 2000 Glenn Manishin <gmanishin@pattonboggs.com> USTA NSAC #51
  4. 4. Technical Factors in Convergence <ul><li>Commoditization of transport </li></ul><ul><li>Integration of IP </li></ul><ul><li>Decentralization of intelligence </li></ul><ul><ul><li>Growth of “edge networks” </li></ul></ul><ul><ul><li>Fiber to the RT (project pronto) </li></ul></ul><ul><li>Ubiquity of wireless networks </li></ul><ul><li>Caching, content and privacy </li></ul>19 Septemer 2000 Glenn Manishin <gmanishin@pattonboggs.com> USTA NSAC #51
  5. 5. Policy Uncertainty of Convergence <ul><li>TA96 — avoiding complexities </li></ul><ul><ul><li>Political issues dumped on regulators </li></ul></ul><ul><li>Regulatory bureaucratic imperatives </li></ul><ul><ul><li>Policy as social engineering </li></ul></ul><ul><ul><li>Electoral politics </li></ul></ul><ul><li>Business imperatives </li></ul><ul><ul><li>Market instability creates regulatory risk </li></ul></ul><ul><ul><li>The “ostrich syndrome” </li></ul></ul>19 Septemer 2000 Glenn Manishin <gmanishin@pattonboggs.com> USTA NSAC #51
  6. 6. The Regulatory Impact of Convergence <ul><li>Who regulates? </li></ul><ul><li>What is regulated? </li></ul><ul><li>How is regulation applied? </li></ul><ul><li>Where is regulation applied? </li></ul><ul><li>FCC v. States, EU v DOJ, congress v. Courts, etc. </li></ul><ul><li>Computer II, VoIP, etc. </li></ul><ul><li>ROR, price caps, benchmarks, etc. </li></ul><ul><li>Rates, interconnection, mergers, content, etc. </li></ul>19 Septemer 2000 Glenn Manishin <gmanishin@pattonboggs.com> USTA NSAC #51
  7. 7. Network Scale and Market Concentration <ul><li>Big fish in little ponds </li></ul><ul><ul><li>End user pressure for globally integrated services and content </li></ul></ul><ul><ul><li>M&A activities creating larger-scale networks </li></ul></ul><ul><ul><li>Existing regulatory “silos” preserve artificial market distinctions from earlier technical eras </li></ul></ul><ul><li>Merger review and policy extortion </li></ul><ul><li>Policy challenges from intermodal M&A </li></ul>19 Septemer 2000 Glenn Manishin <gmanishin@pattonboggs.com> USTA NSAC #51
  8. 8. Regulatory Leverage in Concentration <ul><li>Out-of-region RBOC entry obligations </li></ul><ul><li>OSS/271 conditions </li></ul><ul><li>Advanced services collo., line sharing </li></ul><ul><li>Internet backbone and sales divestitures </li></ul><ul><li>USF and access pricing concessions </li></ul><ul><li>Title VI (cable) open access </li></ul><ul><li>Wireless market divestitures </li></ul><ul><li>Content neutrality </li></ul><ul><li>MSO deconcentration </li></ul><ul><li>Standards development (IM, etc.) </li></ul>19 Septemer 2000 Glenn Manishin <gmanishin@pattonboggs.com> USTA NSAC #51
  9. 9. The Policy Inversion of Concentration 19 Septemer 2000 Glenn Manishin <gmanishin@pattonboggs.com> USTA NSAC #51 Atomistic monopoly networks Concentrated competitive networks Price/entry regulation Social policy regulation
  10. 10. The Regulatory Trilogy Redux <ul><li>Interconnection, universal service and access charges </li></ul><ul><ul><li>1996 Act dictated standards for only 2 of 3 legs of the stool </li></ul></ul><ul><ul><li>Congress provided broad, ambiguous and internally contradictory principles </li></ul></ul><ul><ul><li>FCC developed phased-in approach </li></ul></ul><ul><ul><ul><li>State PUC political pressures </li></ul></ul></ul><ul><ul><ul><li>Protective regulation of small/rural market networks </li></ul></ul></ul>19 Septemer 2000 Glenn Manishin <gmanishin@pattonboggs.com> USTA NSAC #51
  11. 11. Interconnection in the Convergence Era <ul><li>UNEs, UNE-P and resale </li></ul><ul><ul><li>Federal/state dichotomy creates forum shopping and policy delay </li></ul></ul><ul><ul><li>UNE theory conflicts with network architecture in large-scale network interconnection </li></ul></ul><ul><ul><ul><li>TELRIC pricing remains frozen ( Iowa Utilities Bd.) </li></ul></ul></ul><ul><ul><ul><li>Non facilities-based I/C is short-run policy only </li></ul></ul></ul><ul><ul><li>Voice (telephony) and data (DSL, etc.) interconnection rules differ markedly </li></ul></ul>19 Septemer 2000 Glenn Manishin <gmanishin@pattonboggs.com> USTA NSAC #51
  12. 12. USF in the Convergence Era <ul><li>USF, costing and social engineering </li></ul><ul><ul><li>Existing structure accepts historical “revenue requirement” approach to internal subsidies </li></ul></ul><ul><ul><li>1996 Act allows broad regulatory leverage over scope of USF-supported services </li></ul></ul><ul><ul><ul><li>Schools/libraries Internet initiative confuses regulatory paradigms </li></ul></ul></ul><ul><ul><li>Asymmetric contribution scheme incentivizes “creative” classification of convergence services </li></ul></ul>19 Septemer 2000 Glenn Manishin <gmanishin@pattonboggs.com> USTA NSAC #51
  13. 13. Access Charges in the Convergence Era <ul><li>Costs, CALLS and “uneconomic bypass” </li></ul><ul><ul><li>Failure of USF costing preserves inflated access rates and CLEC arbitrage opportunities </li></ul></ul><ul><ul><ul><li>Universal service constraints to loop/NTS cost allocations to end users (SLC, PICC, etc.) </li></ul></ul></ul><ul><ul><ul><li>Competing financial (depreciation) and market (bandwidth charges) ILEC challenges </li></ul></ul></ul><ul><ul><li>Major players (CALLS) unilaterally dictating access charge policies </li></ul></ul>19 Septemer 2000 Glenn Manishin <gmanishin@pattonboggs.com> USTA NSAC #51
  14. 14. Reexamining the Trilogy? <ul><li>FCC and Congress resist fundamental assessment of conflicting policy goals (competition v. subsidies, etc.) </li></ul><ul><li>Market pressures force transitional exemptions to efficient pricing and explicit subsidization principles </li></ul><ul><li>Hidden taxation inherent in current scheme is political “Emperor’s New Clothes” </li></ul>19 Septemer 2000 Glenn Manishin <gmanishin@pattonboggs.com> USTA NSAC #51
  15. 15. Bandwidth and Internet Everywhere <ul><li>Bandwidth impacts markets and regulation </li></ul><ul><ul><li>Availability increases multi-purpose use of networks that cross regulatory boundaries </li></ul></ul><ul><ul><li>Commoditization decreases justification for price regulation of transport and final services </li></ul></ul><ul><ul><li>Caching architectures place pressures on “pipe” networks to play in content space </li></ul></ul><ul><li>Regulators caught in MOU, circuit-switched model that doesn’t translate </li></ul>19 Septemer 2000 Glenn Manishin <gmanishin@pattonboggs.com> USTA NSAC #51
  16. 16. The Bandwidth Dilemma <ul><li>Should new networks be subjected to economic regulation or should legacy networks be deregulated? </li></ul><ul><li>How to harmonize long-run convergence competition and short-run residual market power? </li></ul><ul><li>Are social policy goals (“digital divide”) justification for regulatory taxation? </li></ul>19 Septemer 2000 Glenn Manishin <gmanishin@pattonboggs.com> USTA NSAC #51
  17. 17. The Trilogy (Now and Tomorrow) <ul><li>Switched MOU and per-line special access charges </li></ul><ul><li>USF limited to telecom revenues </li></ul><ul><li>Interconnection applicable only to telephony </li></ul><ul><li>Capacity-rated charges indifferent to usage </li></ul><ul><li>Contributions assessed evenly on IP and legacy networks </li></ul><ul><li>Backbone (peering) and cable systems subject to I/C rules </li></ul>19 Septemer 2000 Glenn Manishin <gmanishin@pattonboggs.com> USTA NSAC #51
  18. 18. Internet Ubiquity <ul><li>From PDAs to cars to refrigerators </li></ul><ul><ul><li>Standards become competitive battles </li></ul></ul><ul><ul><li>Content distribution becomes problematic </li></ul></ul><ul><ul><li>Transport becomes even more essential </li></ul></ul><ul><li>Content integration creates new regulatory cycle </li></ul>19 Septemer 2000 Glenn Manishin <gmanishin@pattonboggs.com> USTA NSAC #51 Telecom Cable TCP/IP Content Providers
  19. 19. Beyond the 1996 Telecom Act <ul><li>When will telecom policy evolve? </li></ul><ul><ul><li>The VoIP abyss (1996-?) </li></ul></ul><ul><ul><li>Access charges and USF (CALLS) </li></ul></ul><ul><ul><li>Broadband policy </li></ul></ul><ul><ul><ul><li>Open access (cable) </li></ul></ul></ul><ul><ul><ul><li>ILEC deregulation (DSL) </li></ul></ul></ul><ul><ul><li>Beyond the basic/enhanced dichotomy </li></ul></ul><ul><li>“ Chinese water torture” of policy </li></ul>19 Septemer 2000 Glenn Manishin <gmanishin@pattonboggs.com> USTA NSAC #51
  20. 20. Building a New Paradigm <ul><li>Difficult long-run policy issues take time </li></ul><ul><ul><li>Transitional level playing field regulation or wholesale deregulation? </li></ul></ul><ul><ul><li>Moving communications away from subsidies and social policy-based regulatory structures </li></ul></ul><ul><ul><li>Conclusion on sustainability of CLEC comp. </li></ul></ul><ul><li>Politics and policy leverage (agency and competitors) incent even more delay </li></ul>19 Septemer 2000 Glenn Manishin <gmanishin@pattonboggs.com> USTA NSAC #51
  21. 21. Who Will Build the New Order? <ul><li>Congress satisfied with delegation, oversight and blame-shifting </li></ul><ul><ul><li>FCC/Administration enjoying unparalleled policy success from extortion </li></ul></ul><ul><ul><li>Private sector too engrossed in building new networks </li></ul></ul><ul><li>Eggheads politicized and indecisive </li></ul><ul><li>EU meanwhile flexes regulatory muscle </li></ul>19 Septemer 2000 Glenn Manishin <gmanishin@pattonboggs.com> USTA NSAC #51
  22. 22. The Consequences of Temporizing <ul><li>Network and business strategy lacks predictable policy planning basis </li></ul><ul><li>Bad results/precedent from application of antiquated classifications (e.g., Frame Relay) </li></ul><ul><ul><li>Increased difficulty of political consensus </li></ul></ul><ul><ul><li>Costs of regulatory “true up” increase (e.g., 1984 Cable Act) </li></ul></ul><ul><li>Policy formation ceded to Europe </li></ul>19 Septemer 2000 Glenn Manishin <gmanishin@pattonboggs.com> USTA NSAC #51
  23. 23. Regulatory Uncertainty and Innovation <ul><li>Innovation effects of uncertainty </li></ul><ul><ul><li>Technical developments freed from shackles of old classifications and silos </li></ul></ul><ul><ul><li>Cooperation among players incentivized, except where in conflict with leverage goals </li></ul></ul><ul><ul><li>Efficiency and QOS influenced by hard economics instead of regulatory considerations </li></ul></ul><ul><li>How much does policy temporizing impact network design and development? </li></ul>19 Septemer 2000 Glenn Manishin <gmanishin@pattonboggs.com> USTA NSAC #51
  24. 24. Back to the Future <ul><li>Future of bandwidth regulation looks like distant past </li></ul><ul><li>Achilles Heel of 1996 Act era is extinction of utility regulation principles </li></ul>19 Septemer 2000 Glenn Manishin <gmanishin@pattonboggs.com> USTA NSAC #51 Market I/C Price dereg. Innovation+ 1880s-1920s Public utility model Universal service rationale Competition suppressed 1934-1996+ Market I/C Price dereg. Innovation+ 2000-?
  25. 25. Conclusions <ul><li>“ I feel the need for speed” </li></ul><ul><li>Superman and X-Men (Rubber Soul) </li></ul><ul><li>“ If you build it, they will come” </li></ul><ul><li>40 years in the desert? </li></ul><ul><li>La Plus Ca Change </li></ul><ul><li>“ Enjoy the ride”! </li></ul>19 Septemer 2000 Glenn Manishin <gmanishin@pattonboggs.com> USTA NSAC #51

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