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Technology Stocks : LAST MILE TECHNOLOGIES - Let's Discuss Them Here
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To: Raymond Duray who wrote (11357)6/20/2001 1:28:58 PM
From: Crossy  Read Replies (1) of 12823
 
Ray,
seems to be that the issue of corporate welfare was raised by you on this thread at the beginning of June. Actually in this case (RBOC / ILECs) I'm pretty in you camp with regard to analyzing the situation why we don't yet have real competition in the last mile and yes, of course, every factual monopoly is an issue of corporate welfare. However I want to point out too that telecom networks are a special type of goods & services in that they are conduits and such type of commodities usually are subject to a scale-dependent efficiency gain that historically was thought to promote "natural" monopolies thru associated increased efficiency of larger/wider networks.

Eeconomic theorie forces us to counterbalance the "deadweight loss" of a monopoly market with this efficiency gain of a big player and developed a set of "regulatory theory" as a framework for oversight bodies, you know all the average cost plus profit type or the return on investment type of regulation that of course enables the effected companies to "inflate" the denominators in question (as always)

Now unlike the LD/backbone market (I think it was an ingenious event that anti-trust authorities realized that this was/is actually a competitive market if seperated structurally from the access networks of the ILECs) the access network is not inherently competitive because of the pre-existing conduit. This huge advantage of the ILECs needed to be counterbalanced and I see the whole thrust of the 96 telecom Act as a structure trying to achieve exactly that: by playing the reciprocity game with the monopoly and have an oversight body the ultimate say when the desired "competitive" level is reached.

There's just 2 problems with this which weren't so much adressed in the 96 framework: first of all it centered overwhelmingly on LD voice - a service that's increasingly becoming a monopoly (rightly so). Secondly it doesn't yet give the DATA portion of the access network the "strategic" coverage it needs.

From a general observation I do not fancy the tone and direction of Tauzin's bill - I see this as a way to dominance of the RBOCs over the LD companies (and what's being left of them) so I'm happy that this ill defined concept seems to be getting buried quickly.

OTOH MikeM got something right when he thinks that the missing incentive to the ILECs to actually control what they deploy when they roll out broadband facilities (because they later have to share their investment with competitors) in the process. So they stall it or at least deliberately "under-engineer" those facilities (just ADSL no SHDSL to prevent cannibalization of lucrative T1 lines for example)

From a casual glance the RBOCs seem to have "learnt the lesson" of the Airline Industry (PanAm etc. !) where the facility-based providers faced losses but the discounters but alternative business models like Southwest Airlines (NYSE: LUV) that tried to avoid investments in facilities have been thriving since deregulation. But the RBOCs "structural" cards were even better because their ILEC territory were real local monopolies whereas the traditional Airline Industry was multi-faceted in its own right.

Strategically (in the sense of Christenson and Gary Hamel) a company has to be able to control IT's OWN DESTINY to be succesful. The CLECs were never in a position to do this when they were dependent on UNEs provided by others and regulatory fiat in their favour. This dilemma leads me to believe that maybe the wireless broadband route could be a better route to meaningful competition as well as a BOTTOM UP effort ignited by real estate builders.

A related, aspect that I find quite interesting is that we all seem to know about the endpoints "broadband access, at best at a competitive level and even better of a symmetric kind" but the business models to PROFITABLY reach those endpoints we have not yet discovered. But without this "tested" business model the "self-sustainability" of competitive local broadband access is not yet laid down. So we are back to trial and error. Looks like time being turned back 3 years (1997)

all the best
CROSSY
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