Let Telcos Fail Fast
to Chairman Cites "Natural Process"
Washington, DC, October 21, 2002
- An influential group of Internet analysts and business executives today
urged the Federal Communications Commission (FCC) to let failing telecom
companies fail, and "fail fast." The 44 signatories, led by independent
telecommunications analyst David Isenberg, said in a letter to FCC Chairman
Michael Powell that Internet-based technologies are subsuming the value
embodied in the traditional telecommunications networks. According to
the group, "This is causing the immediate obsolescence of the vertically
integrated, circuit-based telephony industry of 126 years vintage. [Telephone
company] bonds used to purchase now-obsolete infrastructure assets have
become (or are inexorably becoming) bad debt."
The group urges the FCC to resist
telephone company pressure tactics to prop up businesses that technological
progress has made obsolete, in order that advances in newer, better forms
of communication not be stifled. Calling the current telecom troubles
"not a disaster, but a natural event," the letter says a "revolution in
productivity and human benefit as big as the agricultural and industrial
revolution" could result.
"Too many business analysts
are talking about bubbles and over-leveraged balance sheets as the root
cause of current telecom troubles," said Isenberg, commenting on the letter.
"This confuses the symptoms with the disease. These things are just symptoms
of the fact that Internet technology has made phone companies obsolete.
If the government tries to treat the symptoms, the American economy will
actually stay sick longer than if the natural process is allowed to run
The proper course, according
to Isenberg, is to write down all circuit-based telephone assets to reflect
their obsolete value, and re-capitalize the industry with as little government
intervention as possible. "People will continue to use the existing
telephone network for years to come, just as people still rode in horse-drawn
carriages for years after the automobile was invented. But the government
never subsidized buggy whip makers, and it should not subsidize telcos
Included in the letter are four
recommendations to the FCC:
that non-Internet communications equipment, while not yet extinct, is
economically obsolete and forbear from actions that would artificially
prolong its use.
by incumbent telephone companies to thwart municipal, publicly-owned,
and other communications initiatives that don't fit the telephone company
Accelerate FCC exploration
of innovative spectrum use and aggressively expand unlicensed spectrum
Isenberg said that this point
of view has evolved over the last several years among the signers, and
has been reinforced by market activity. "The results of the new Internet
technology on the old are there for all to see in the industry stock prices.
We just want people to think clearly about how to move forward for the
greatest public benefit."
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