Posted by: Bob Quinn on July 2, 2010 at 9:16 am
I was struck over the last several days by a series of pronouncements coming out of the Commission. First, on Tuesday, June 22, the FCC released an Order denying Qwest’s request for forbearance from wholesale and retail regulations in the Phoenix MSA. Then, on Friday, June 25, the Commission released the latest version of its mislabeled “Local Telephone Competition Report.” I say mislabeled because the Report actually includes only wireline services in calculating its Local Competition numbers (to be sure, there are tables that include fixed wireless and CMRS statistics, but those figures are buried in the Report and are not included in the Local Competition analysis).
Taken together, these two reports demonstrate all that is wrong with the analysis going on over at the Commission and how it is counter-productive to the goals of the National Broadband Plan. I am going to take these releases in reverse order. With respect to the Local Competition Report, I was surprised that even with the skewed way the FCC looks at Local Competition (by excluding wireless), the nationwide Incumbent local telephone provider (voice) market share had fallen to 73% (Local Telephone Competition Report, Table 1). Now standing alone that number — 73% — isn’t remarkable, but when you start doing some number crunching including the wireless substitution data ignored by the Commission, you really start to understand why the focus of the National Broadband Plan is on finding ways to incent – and remove barriers to – investment in infrastructure, particularly wireline infrastructure.
In Qwest, the Commission cited a December 2009 Federal Report (the “2010 Center for Disease Control Wireless Substitution Report“) which concluded almost 25% of consumers had “cut the cord,” meaning the consumer only has a mobile voice service. And that makes sense given the data in the FCC’s Local Competition Report which shows that the number of residential wireline voice connections in the last nine years has declined from just over 143 million in December 1998 to about 97.4 million in December 2008 (Table 2).
So I took out that new Local Competition Report and my trusty calculator (always a dangerous combination) and did some math. If the CDC was right, then there are really 25% more residential “local telephone” subscribers than the FCC Local Competition Report suggests — meaning that instead of 97.4M residence customers, there are really 129.8M residence subscribers — and by the way, this only takes into account the folks who have gone wireless-only, giving zero weight to consumers who communicate almost exclusively via wireless but still have a wireline phone. When you redo the math with those numbers, the market share numbers to me become astounding. Residence and business, the Incumbent market share stands at just over 60% (and only because we assume there are zero wireless- only businesses out there, which is absurd). On the residence side, the overall market share for incumbents stands at 55%.
Consider that AT&T Corp. was declared non-dominant during the Bill Clinton administration with significantly higher market share numbers in the residential market and you can begin to see why I was dumbfounded. That 55% is a nationwide, whole industry number. Imagine what it looks like in individual markets like Dallas or Chicago or New York or do I dare say — Phoenix. But imagine is what we’ll have to do because the FCC doesn’t collect that type of wireless substitution data.
But hey, why do they need to collect data they have no use for. I mean, they don’t include wireless in their Local Competition Report calculations and they rejected use of that data as well as over-the-top competition (VoIP) in the Qwest Forbearance proceeding. And we know from the special access proceeding that they don’t collect or have data on where competitive facilities are or why competitive providers can’t use their own fiber (in most cases running on the street right outside of a commercial building) to serve customers. I mean they even excluded UNE-based CLECs from their analysis in the Competition section of the National Broadband Plan (because, in their words, that would “overstate the level of competition”).
Isn’t all of this data relevant? Isn’t it pertinent to answering the question of how we are going to get more infrastructure built in this country? When an agency ignores common sense facts (as was the case here and with the Wireless Competition Report when for the first time in nearly a decade it failed to find the wireless market competitive) or doesn’t seek out the facts relevant to achieve the objectives stated in the National Broadband Plan (massive infrastructure investment), doesn’t it give the appearance of retaining or imposing regulation for the sake of regulation itself? I’m just asking…
