In the movie Field of Dreams, Ray Kinsella (Kevin Costner) hears a voice tell him, “If you build it he will come.” What does this have to do with telecom policy you ask? Everything. Carriers build communications infrastructure in much the same way – without the whispering voices at night of course. Facilities-based providers are forward looking — investing and deploying so consumers and businesses will come and enjoy the next generation services.
And today’s explosion of data traffic, especially in the wireless market, gives facilities-based providers every incentive to peer into the future and invest to keep up with demand. Infrastructure investing today means deploying fiber or other advanced high capacity technologies as closely as possible to residences and businesses to unlock high bandwidth services. The Field of Dreams for policymakers is where multiple providers make those infrastructure investments to provide business and residential consumers not only with needed capacity, but also with competitive choices.
Which brings me to the wonkish issue of special access.
As a part of our merger with BellSouth, we voluntarily agreed to offer temporary, but significant reductions on our interstate special access services (purchased primarily by businesses). After 3 ½ years, that merger commitment expires tomorrow, June 30th. These rates will then revert to our original tarriffed rates.
Using the expiration of those discounts as an excuse, some in the industry have decided to resurrect a coalition calling for those discounts to be extended or to have the government impose price controls on those legacy, copper-based special access services.
People sometimes use the term Next Gen to describe the Next Generation of technology. I like to think of those special access services as Last Gen, as in yesterday’s technology. I mean, are we really having a policy conversation about a DS1 connection that provides 1.5 Mbps connectivity for businesses in 2010? Why aren’t the companies that are complaining about our special access prices instead focused on getting their own fiber into buildings they want to serve? Instead of talking about DS1s they could be investing in far more capable technology. By the way, there are plenty of companies who are way beyond talking about those Last Gen services and are building their way into broadband.
Consider cable and fixed wireless providers who have made significant infrastructure investments to provide competitive services to businesses using their own facilities. It is this type of investment in infrastructure that is the Field of Dreams for policymakers – something they should do everything in their power to continue and replicate across the whole country.
But instead of investing in their own facilities, a handful of companies prefer that the government set prices – and artificially force them down. This is wrong for many reasons. Chief among them is that if government controls prices of Last Gen technology, no one will invest in Next Gen technology. If you doubt this, look no further than statements made by one provider warning investors of the potential dangers of any FCC action that would “artificially lower and cap special access transport pricing.” Doing that only makes it harder for the providers of new technology to get a foothold in the market. Recall also the counsel of Sprint’s Chief Technology Officer who, in April 2008, indicated that the reason microwave backhaul (Next Gen) hadn’t taken off in America as it had in other parts of the world was that an abundance of cheap copper-based (Last Gen) facilities made deployment uneconomical.
More fundamentally from a policy perspective, this debate over old wires is puzzlingly misguided. When we participated in the National Broadband Plan workshops, the focus of policymakers was always on next generation fiber or other high capacity technology necessary to ensure broadband’s availability throughout the country. There was hardly any discussion of copper facilities pricing because that is yesterday’s technology. The Broadband Team’s focus was on the future not the past. They seemed to recognize heavy regulation of old technology would reduce the incentives for anyone to invest in new technology.
Admittedly it’s easier to complain than to build. It’s even easier to ask that government transfer money from someone else’s shareholders to yours. But the FCC’s stated goal is not to ration scarcity – it’s to incent investment. And the FCC’s mission is not to pick winners and losers among companies – it’s to bring the benefits of broadband to all Americans. Instituting price controls so that others can avoid investing will have profound, adverse consequences for broadband deployment. So for those wondering what the fuss is about, this is a question of whether the FCC policies should encourage firms to invest in and build out tomorrow’s fiber networks, or whether FCC would rather stake our broadband future on yesterday’s technology, the copper wire. Here’s hoping that they hear the voices that Ray Kinsella heard.