Who Can Fix Old-line Phone Companies?

By Doug Mohney September 05, 2014

Incumbent telephone carriers –thy names are AT&T and Verizon—are fundamentally broken in how they function.   We should all come to the table and admit there is a disconnect between the public good, monopolistic attitudes based on size and legacy entitlements, investor demands, and the relentless pace of technology delivering better solutions.   And we should start working on solutions for the public good.

Current Federal Communications Commission (FCC) Chairman Tom Wheeler skimmed the tip of the larger problem in public remarks made on September 4 noting the lack of competition in high-speed broadband.  Three-quarters of American homes have "no competitive choice for the essential infrastructure for 21st century economics and democracy."  In a lot of areas, there's a duopoly of cable and incumbent telco, with upgrades and faster services only coming when someone like Google or CenturyLink shows up with gigabit fiber.

Move away from big cities into relatively rural areas, the picture is ugly. Nearly 14.5 million people lack access to the most basic FCC broadband service defined as 4 Mbps up/1 Mbps down, with only 37 percent of rural consumers covered by at least four 3G or 4G mobile wireless providers' networks.

Incumbent carriers don't want to invest in what they consider to be marginal markets, but when local municipalities move forward on fiber projects, lobbying and screaming begins on how government should not compete with private interests on infrastructure.  

This has to stop. If incumbent carriers can't meet their obligations—yes, I said obligations, and I'll explain why in a moment—to provide broadband services, municipalities should have free reign to deliver solutions. End of story.

During the breakup of the old AT&T into smaller regional phone companies, the "Baby Bells" (at that time) received a local monopoly on services, including infrastructure, rights of way, and access to a large customer base.  The de facto assumption by all was that those companies would continue to invest and upgrade facilities for better services.  It was an assumed obligation in exchange for breaking up AT&T into smaller entities to foster competition.

Instead, incumbents started optimizing business for Wall Street.  There are few to no incentives for incumbents to deliver high-speed broadband in areas where the business case seems to be marginal or less than desirable. Clear examples are Verizon's willy-nilly rush to dump copper and replace it with a less-than-adequate wireless replacement in some of its markets and failing to describe a clear broadband path for non-FiOS territories.

If incumbents aren't going to invest in the territories they hold rights-of-way and customers, why should they continue to hold a monopolistic access to those customers?  Incumbents fall back on the "government shouldn't compete with businesses" argument, but municipalities effectively provide competition in areas where there is none.

Enhanced 911 services are another area where there's a disconnect between the public good, regulation, and incumbent interests.  Third-party services such as Foursquare/Swarm and Facebook derive better location accuracy than current mobile wireless carrier methods for determining position.  There's a non-profit coalition, Find Me 911, that is lobbying to get the FCC to implement better location methods for indoor 911calls using already existing and deployed in-network cellular technologies; some methods don't require modification of hardware or software.

Incumbent cellular carriers have been dancing around the issues with providing more precise 911 location data for what seems like almost a decade. The public good—not to mention the potential for profitable location-based services—would indicate that cellular carriers should do this on their own, rather than having to be told to do so by the FCC.

The FCC and incumbents are long overdue for a broader dialogue on roles and responsibilities around the public good, rather than fighting it out an issue at a time.  As carriers seek financial and business advantage during the transition from the legacy PSTN to an all IP network, the time is right to fully evaluate what the public should expect from incumbents moving forward.

Edited by Maurice Nagle

Contributing Editor

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