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December 24, 2014

Is It Time to End the FCC?

It’s always strange when multiple conversations from different groups converge on a topic. Recently Michael Powell, former FCC chairman, pointed out that the history of the FCC was based on monopolistic powers which no longer apply. He had a lot of other points, but this one hit me hard.

Back in the days when I would visit the FCC with my boss, our view was that we were building a competitive marketplace with VoIP, and that services like Skype and Vonage would level the playing field. Quite honestly, in some ways it did. The price per minute has gone down tremendously since the early 1990s, and international calling has increased tremendously through VoIP systems and the rationalization of settlements.

On the other hand, competitively speaking the cable operator and the local wireline operator are not exactly hitting it out of the ballpark. Most aggressive carriers like Quest and Level3 have settled into a backbone with strategic services to the Enterprise. For consumers, the Triple Play is a duopoly between cable and wireline.

When Sprint launched Clear, the wireless operator took a stab at being an alternative, but never got the momentum.

Now we are on the verge of LTE being an alternative to the wireline and cable solutions, but the pricing is not designed to be an alternative access service.

Cable has hedged its bet with Wi-Fi deployments that over time may deliver access solutions.

Alternative technology solutions like LTE-U need business deployments to show that the cross elastic impact is valid.

All of this points to a market that is still not fully developed.

So the FCC has the problem of fostering competition, while having the courts, congress and consumers telling them to redefine Net Neutrality.

Given the plurality, the redefinition of Net Neutrality is not a likely success.

If the playing field were level, I would say the FCC should be brought into the FTC and let those guidelines take over the issues of grievances and compliance.

However the playing field is not level, and while I can make cases for alternative access methods, I have a rough time finding anyone who was not burned in the 1990s that wants to invest the capital to compete. Vonage’s history is a case in point, as so much of the cost for Vonage was in marketing to acquire a relatively small base. Even Skype, while high on minutes, has a bad business case (except for exits and acquisitions).

Looking at the market, the stratification that existed is gone, but the removal of oversight is premature.

One day, carriage and application (remember voice is just an app) may be separated enough to twilight the FCC as well as the PSTN.

Today, I don’t think that solves the problem.


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