NMRC Newsroom

REPORT: FCC "UNE-P" RULE IS WORSENING TELCOM SLUMP, LIMITS CONSUMER ACCESS TO BROADBAND, OTHER SERVICES

FCC Expected to Decide on Fate of Controversial Pricing Model By February 20, 2003

WASHINGTON, D.C. /// February 4, 2003 /// The pricing model know as UNE-P (Unbundled Network Elements Platform) being reviewed at the Federal Communications Commission has "heightened and prolonged" the severe decline in the telecommunications industry and works to limit consumer choices, including access to broadband services, according to five experts stating their view in a report issued today by the New Millennium Research Council (NMRC).

The report, entitled "What’s at Stake at the FCC on UNEs: Ensuring Sustainable Competition," features papers from the following academics and industry researchers: Alliance for Public Technology Policy Director Matthew D. Bennett; TeleNomic Research President Stephen B. Pociask; Eastern Management Group President and CEO John Malone; Competitive Enterprise Institute Senior Policy Analyst Solveig Singleton; and Progress & Freedom Foundation (PFF) Senior Fellow and Director of Communications Policy Studies Randolph J. May. The NMRC works to foster policy research focused on developing workable, real-world solutions to the issues facing policy makers, primarily in the fields of telecommunications and technology.

The NMRC report notes: "The downturn in the telecommunications industry has been heightened and prolonged by regulation that favors quick entry over sustainable, long-term competition ... The FCC can stimulate investment in new and advanced networks, by eliminating rules that restrict local phone companies from competing with the dominant broadband players. Removing unbundling requirements and encouraging competition will encourage the construction of alternative networks so that consumers can have a real choice of provider. This action will also spur investment in and deployment of broadband, enabling more Americans to access advanced telecommunications services."

VIEWS OF THE EXPERTS

The five experts in the NMRC report examine whether or not the current regulatory pricing model known as UNE-P is promoting investment in advanced telecommunications infrastructure. Among the major conclusions of the contributors are the following:

The telecommunications industry slump has been worsened by the UNE-P rule. John Malone, president and CEO of Eastern Management Group writes: "UNE-P didn’t bring down the communications market, but like a stroke delivered after a fall down a flight of stairs, it has kept the victim on the floor."

UNE-P is discouraging the long-term investing needed to create more consumer choices for services such as broadband. Matthew D. Bennett, policy director of the Alliance for Public Technology notes: "UNEs are a temporary fix. In the short term, unbundling has encouraged a rise in competition statistics, but it has done immeasurable damage to the long-term prospects for deploying advanced services. It has discouraged network upgrades (for broadband and other services) in urban and suburban areas and led to practically non-existent investment in rural and underserved communities." Stephen B. Pociask, president of TeleNomic Research, notes: "Changes limiting the extent of unbundling for high-speed Internet services, as well as rules that provide symmetrical regulatory treatment of broadband investments, would bring relief to broadband investors."

"While UNE-P was created to jumpstart competition, ironically…it has actually discouraged facilities-based competition … The fact is that UNE prices are being set so low they have effectively become a subsidy for CLECs paid by their competitors, the ILECs."

"For if the Commission chooses [Static Regulated Competition] embodying an indefinite future of ‘managed competition,’ investment in advanced telecommunications facilities and equipment and innovative new services will be impaired."

UNE-P is costing America quality, good-paying jobs. Without a fair return on investment, it becomes increasingly difficult to maintain current workforce levels. In the past 18 months alone, the communications and information technology industry has lost more than 500,000 jobs. As May writes: "This stifling of investment obviously will have a continuing adverse impact on jobs in the already depressed telecom and high-tech sectors and thus on the overall economy." According to an earlier NMRC study of February 25, 2002, full broadband deployment would result in the creation of 1.2 million new jobs. Information technology jobs also pay, on average, 85 percent more than other jobs.

The preceding is a partial list of the key conclusions in the NMRC report. For the full text of each expert’s submission, go to www.newmillenniumresearch.org on the Web.

ABOUT THE EXPERTS

Matthew D. Bennett is policy director of the Alliance for Public Technology, a non-profit membership organization concerned with fostering access to affordable and useable information services and technologies to all people. He educates and advocates for policies that expedite the deployment of advanced telecommunications services to all sectors of society, working with and establishing coalitions to spur involvement in telecommunications issues. Before joining APT, Mr. Bennett served as senior associate for Communications and Government Relations at the Alliance for Community Media.

John Malone is president and CEO of Eastern Management Group, one of the oldest and largest management consulting firms focused exclusively on the communications industry. He provides professional services to leading edge communications companies and governmental institutions worldwide. He and his firm have advised every major telecommunications manufacturer, software company and carrier in North America, Asia, Latin America and Europe. John Malone has been professionally involved with the telecommunications industry for more than 30 years.

Randolph J. May is senior fellow and director of Communications Policy Studies at the Progress and Freedom Foundation, a market-oriented think tank that promotes innovative policy solutions for the digital age. He examines policies relating to deregulation of the competitive telecommunications industry and the implications of competition for reform of the FCC. Prior to joining PFF, he was a partner with Sutherland Asbill & Brennan in Washington, D.C., specializing in communications and administrative law. He has served as associate general counsel of the FCC and as a Member of the Administrative Conference of the U.S. He has published more than 35 articles on a wide variety of topics ranging from communications law to constitutional theory. He is an adjunct professor of law at George Mason University School of Law.

Stephen B. Pociask is president of TeleNomic Research, an economic and strategic consulting firm focusing in research on Information Technology, Internet and Telecommunications markets. Over the past 20 years, his studies have been filed with both federal and state regulatory commissions. He has appeared before the FCC and testified before Congress on Internet and broadband legislation. Before founding TeleNomic Research, Mr. Pociask served as chief economist and executive vice president for a D.C.-based economic consulting firm.

Solveig Singleton is Senior Policy Analyst with the Competitive Enterprise Institute, a non-profit public policy organization dedicated to the principles of free enterprise and limited government. Ms. Singleton is the former director of Information Studies for the Cato Institute. She served as vice chair of publications for the Telecommunications and Electronic Media Practice Group of the Federalist Society for Law & Public Policy Studies from 1996-1999. Her articles have appeared in The Washington Post, The Philadelphia Inquirer, The Wall Street Journal, The Journal of Commerce, Internet Underground and Hot-Wired, as well as academic journals. She is the co-editor of two books, Regulators’ Revenge (1998) and Economic Casualties (1999).

ABOUT NMRC

The New Millennium Research Council (www.newmillenniumresearch.org) consists of independent academics and researchers who are experts in their fields. Both seated experts and invited scholars author NMRC reports. During the last 12 months, the Council has investigated a range of issues related to competition in the telecommunications industry. The NMRC has also sponsored a number of roundtable events in Washington, D.C., and legislative briefings on the subject.

CONTACT: Christine Kraly, for NMRC, (703) 276-3258 (direct line) or ckraly@hastingsgroup.com.

EDITOR’S NOTE: A streaming audio replay of the February 4, 2003, news event featuring the comments of the five experts featured in the NMRC report will be available on the same date as of 6 p.m. EST. on www.newmillenniumresearch.org