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Regulation: less is best.


It's time to stand up for less regulation and more competition in telecommunications and stop dragging your feet acros the corpse of rate-of-return regulation.

Nowhere is this reluctance more evident than in the resistance to incentive plans.

Telecomm managers who believe they can have dozens of vendors vying for their business, and yet maintain tight regulation of dominant suppliers, are doing their companies a disservice.

Telecomm deregulation has been a smashing success. No segment of society has benefitted as much as large business users. Despite this record they continue to listen to a cacophony from special interest voices advocating strict rate-of-return regulation.

Incentive plans are a brilliant compromise to move us toward total deregulation without allowing prices to fluctuate uncontrollably. Incentive plans work in many local service areas and at the national level. They will work for access services of local exchange carriers, as recently proposed by the Federal Communications Commission, if given a chance.

Unfounded Fears

Why do large business users who have profited so handsomely from deregulation continue to fear more deregulation? There are several reasons.

This reluctance is due, in part, to the normal resistance to change inherent in everything we do. It is easy and safe to want to deal with one vendor at one price and blame all mistakes on them.

The eyes of most telecomm managers glaze over when regulatory problems are encountered. They follow blindly promises of "rollbacks, price freezers," and "reduced profits," although their own companies abhor regulation in any form.

Meanwhile, telecomm advances continue uninterrupted. New digital radio technology, or "wireless" communications system, promise revolutionary benefits. Wireless systems offer the best opportunity to break the mostly-residential local monopoly.

The most perplexing problem is achieving fair, economical connection to the existing universal network. This was solved for pole attachment access in the case of cable operators. It can be solved for all local service access if we work seriously on the problem and strive for a solution.

In the process, will all telecomm vendors have an equal opportunity to provide wireless systems and access to the universal network or will we regulate (restrict) some vendors?

We also need to reverse the trend of falling behind in world markets because some of our largest telecomm vendors are not allowed to manufacture and thus cannot export.

The U.S. Department of Commerce has a new 250-page report, "U.S. Telecommunications In A Global Economy: Competitiveness at a Crossroads," issued in August.

It states, "The United States' share of both the U.S. and the world telecommunications equipment market is declining ... the United States is no longer competitive in many areas of customer premises (terminal) equipment, particularly low-end equipment ... the American commercial and technological advantage in large-scale central office switching and sophisticated fiber optic transmission systems is narrowing in the face of challenges by foreign manufacturers."

This excellent report certainly doesn't suggest more regulation. It states, "The principal competitive advantage for many foreign-based companies in this market appears to be superior production techniques and efficiency, not necessarily lower labor costs, as is commonly assumed."

Rate-of-return regulation doesn't promote "superior production techniques and efficiency!" It promotes inefficient production, diminished cost control needless expense, and sloth.

Rate-of-return regulation is cost-plus regulation. That's a lousy way to run anything except a war.

As more issues shift rom FCC jurisdiction to more highly politicized state arenas, tight regulation gets even more burdensome.

The New York Times, editorializing on surface, airline and telecommuications deregulation, said it best: "... a politicized regulatory process produces a political outcome ... imperfect regulation can be every bit as bad as imperfect competition."

The Politics Factor

This is what is happening, and will continue, in many states. Most state utility commissioners are political appointments. They serve at the pleasure of a governor whose primary telecomm interest is to maintain low, subsidized local service residential rates, usually at the expense of innovation and progress in other areas.

Why are average business rates in most areas three times residential telecomm rates? You needn't be a candidate for a Nobel prize to answer that.

Another big issue will be if telephone companies should be allowed to carry cable programming and if cable companies can provide telecomm services. The services of these two industries will surely be merged to some degree before this decade is over.

That prospect has obvious advantages for business and residential users, but it will mean a further relaxation of regulatory restraint if these mammoth industries are to function and prosper.

No one, supplier or customer, can withstand the delays, expense and political uncertainties of tight regulation in innovative, dynamic industries.

No one suggests the dominant local exchange and interexchange carriers will act altruistically without some prodding. They need continued oversight as we travel this road to total deregulation and full competition that began over two decades ago. But we need to absorb innovations in regulation as much as we need to absorb technological innovations. Telecomm managers need to understand the advantages of this process.

Look for ways--ENCOURAGE ways--to PUSH for less regulation and innovation is regulation. Don't jump blindly on the regulation bandwagon if your association, consultant, or legal counsel says "jump!"

Augie Blegen is a telecommunications consultant and executive director of the Association of Data Communications Users, Inc., P.O. Box 20163, Bloomington, MN 55420, (612)881-6803.
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Title Annotation:Datacomm User
Author:Blegen, August
Publication:Communications News
Article Type:column
Date:Oct 1, 1990
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