We'll Trade You Hawaii And A Player To Be Named Later For Your Telecom Regulator And Daisuke Matsuzaka

from the please? dept

Wed, Jan 17th 2007 3:04pm — Carlo Longino

The FCC's history of intervening in telecom markets is nothing if not consistent. Sadly, though, they're consistent at being ineffective and unable to create a truly competitive environment that would benefit consumers and the nation's economy as a whole. The biggest problem is that it doesn't really seem to understand that real competition means more than having two actors in a given marketplace -- a situation that often leads to the appearance of uncompetitive behavior. So what happens is the FCC gets hung up on arguing small, meaningless points that really do nothing to increase the overall level of competition, ignoring the larger, more fundamental issues that skew the marketplace. For instance, there was a lot of dithering in the FCC's approval process of the recent AT&T-BellSouth merger. The deal was eventually approved with some concessions, that despite the hollering of some commissioners and commentators, really don't mean much. John Quarterman points out how one such concession -- that AT&T will sell naked DSL in some areas -- sounds great, until it's compared to the broadband market in Japan, which like the US, opened up its telecom market (and specifically, incumbent NTT's network) to competition. Now, in Japan, people can get 50 Mbps DSL for about $25 per month, and 100 Mbps fiber connections for about $30, which pretty much blows any broadband on offer in the US -- especially AT&T's 768 kbps naked DSL -- out of the water.

The difference is in how regulators in the two countries introduced competition into the marketplace, and how they continue to ensure it stays competitive. The Telecom Act of 1996 in the US forced incumbent telcos to lease their lines to new competitors at fixed rates, though, of course, the telcos did their best to resist, and even if they did get caught breaking the law, the penalties were hardly enough to discourage them from doing it again. Of course, most competitive carriers were already out of business (for plenty of reasons, not just shady incumbent practices), but the Supreme Court in 2005 basically killed line sharing and dealt a blow to what little competition it had engendered. Contrast this to Japan, where in 2000 regulators forced NTT to unbundle its local loop, didn't let it drag its feet and stymie competitive carriers, and didn't let NTT get the law chiseled away by lobby groups and lawyers. Because of this, they don't have to act like concessions that do nothing to raise the overall level of competition are major milestones. In short, Japanese regulators developed an effective policy and ensured it was enforced, resulting in a flourishing, competitive environment. That's quite a change from the apparently telco-friendly mantra of the FCC, whose meddling only seems to ever result in higher prices and less competition. The problem in the US isn't necessarily things like the AT&T-BellSouth merger and the need for the merged company to let people buy naked DSL; the problem is that the entire marketplace is, at its heart, uncompetitive -- and that's the fault, and the responsibility, of the FCC.

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16 Comments

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dorpus, 17 Jan 2007 @ 4:10pm

Other Funding
In Japan, everybody is required to pay monthly "receiving fees" to NHK, the state-owned TV monopoly. Men in black suits known as "NHK Men" literally come to people's doors to collect cash payments, and people who refuse to pay are sent to court. So the money for this stuff does come from somewhere.

Korean Gangster Masayoshi Son also uses strange funding to provide free Yahoo broadband access, defrauding investors with promises of "future profits".

Despite Japan's image as a high tech mecca, credit card usage remains rare, and few businesses offer web-based transactions. Few companies even have home pages of substance. "Internet transactions" are handled through cell phone companies with hard-to-read screens for businesses. Most people still prefer to carry big bags full of cash and pay in person.
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Mike D, 17 Jan 2007 @ 4:17pm

U R B A N S P R A W L
I really can't stand it when people blame the differences between the US and other countries solely on regulation. In this case the difference has very little to nothing to do with regulation. Regulation would have fragmented the market and slowed the roll out of new tech because the telecom companies wouldn't have been making enough money to pay for it. The reason the US is so different is because I DON'T HAVE A NEIGHBOR IN EVERY DIRECTION INCLUDING UP AND DOWN. We have places called suburbs. We also have LOTS more cities and lots more land then Japan. EVERYTHING is more expensive here. duh
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dorpass, 17 Jan 2007 @ 4:45pm

Re: U R B A N S P R A W L
Dorpus, thanks for another first post full of nonsense.

Mike D, can your critique at least contain substance? Explain to me how regulation fragments the market?
And by the way, regulation that exists in US actually DOES slow down the roll out of new tech. You must have missed the past 10 years if you think US has been right on top of telecom revolution.
Population density has nothing to do with the speed of internet or how often your cell phone drops calls. As large as America is, you might do yourself a favor and actually find out what territory is occupied by 90% of population. Amazingly, its not 90%.
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Anonymous Coward, 17 Jan 2007 @ 4:46pm

Re: U R B A N S P R A W L
"Regulation would have fragmented the market and slowed the roll out of new tech because the telecom companies wouldn't have been making enough money to pay for it."

Yeah, because they've been really snappy at upgrading that copper line to your house over the last 10 years.
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amazed, 17 Jan 2007 @ 5:11pm

a thought
Hmm, know what would be nice? A comment ranking system. Perhaps user-driven comment regulation could be useful, might encourage actual on-topic and informed posting...
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dento77, 17 Jan 2007 @ 5:43pm

Re: a thought
not a prob... score: 0 reason: off topic
the real reason we don't have high speeds like that of parts of europe and japan is the RIAA and MPAA. slow uploads = not as much pirating of music and movies. i bet if there was a way to see who the MPAA and RIAA pays off, it would make the NY Times Best Seller list for weeks on end. Just my 2 cents.
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Gunnar, 17 Jan 2007 @ 5:49pm

Re: U R B A N S P R A W L
Someone is confusing Tokyo for Japan.

Japan has suburban and rural communities too. And Japan is at least as expensive us.

As for us having more land and more cities, true. We also have more people and more customers and more businesses. What we probably don't have, is more broadband providers.
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tokjdm, 18 Jan 2007 @ 2:22am

Re: Other Funding
I wonder where Dorpus has been getting his information. NHK subscription fees are paid to the NHK (public corporation) which has nothing to do with broadband and is fully unrelated to NTT (private company).
Yahoo Broadband Access has never been provided for free. Softbank used the usual Japanese trick of building market share as fast as possible for ADSL broadband by offering cheap connections (and rather bad service) and became a major player in that market in the matter of a few years.
The other comments are either without substance or out-of-date.

What Carlo fails to mention is that although the broadband market has been slightly liberalized, this is not true of other parts of the telecom market. The fact that the telecom ministry used to oversee NTT is not unrelated to the fact that liberalization whenever it occurred has been heavily biased against any new market entrants (witness Softbank's efforts to get assigned part of the wireless spectrum to deliver new mobile services). The liberalization of the broadband market is not unrelated in my view to the fact that it has been pushed by huge players such as Tepco (electricity) which are not supervised and do not depend initially from the telecom ministry. When Tepco managed to push for 100MB fiber optic connections, traditional telcos had to significantly improve their offering.
No one is offering Skype over 3G in Japan right now although this should be technically possible because no new entrant has been allowed and the existing players prefer not to destroy their existing position.

As someone said in the comments, comparing two countries should be done with care.
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Strunk N. White, 18 Jan 2007 @ 3:38am

Why Johnny (and Carlo) Can't Write
OK, I can't go on any more reading this article. Let's just look at that key big nasty "sentence", which I'm counting as "things separated by periods" rather than by any grammar definition, and coming up with # 7 in your rant.

"John Quarterman points out how one such concession -- that AT&T will sell naked DSL in some areas -- sounds great, until it's compared to the broadband market in Japan, which like the US, opened up its telecom market (and specifically, incumbent NTT's network) to competition."

Holy crap. You have three parenthetical clauses, each separated in different fashion. Once using dashes. Once using commas, albeit inappropriately. Once using parenthesis. That doesn't add spice or variety. It makes your writing confusing and really, should be on Techsh*t.com and not Techdirt.com.

Let's remove the parenthetical clauses and see what meat is left before we try to decipher any meaning. That leaves us with:

"John Quarterman points out how one such concession sounds great, until it's compared to the broadband market in Japan, which opened up its telecom market to competition."

The comma before "until" is in error, contributing much to your choppy style, but adding nothing to your knowledge of punctuation.

"John Quarterman points out how one such concession sounds great until it's compared to the broadband market in Japan, which opened up its telecom market to competition."

Now it's easier to see your logical fallacy, just by your own language. You're comparing a "concession" to a "broadband market" to a "telecom market". Like comparing apples to oranges to Grape Nuts.

And it took you until the SEVENTH SENTENCE to get to your point. SEVEN SENTENCES to even introduce the word "Japan", which is a key component of your unabashedly-"I'm so very very witty" headline about trading away Hawaii to the country that bombed it and brought us into World War II. Ignoring that little patriotic faux pas, the WHOLE POINT of a headline is to draw the reader into the article. Once there, the first sentence or two at most should be giving the reader deeper meaning behind the headline, encouraging the reader to read the rest of your article. Instead, the reader has to go through SIX PRIOR SENTENCES before you even get to the point. And those are six sentences jammed full of parenthetical cr*p that would ideally up the sentence count if made more readable.

It's nice to get technology news. And I have no clue if you write these things for free or if you get paid. And maybe you see yourself as a charming and witty storyteller and not a journalist. A blogger and not a reporter. Whatever. But if you expect anyone to actually take the effort to READ your articles, you would do well to actually take some effort to make them readable. I'm not saying you have to use inverted pyramid style. I'm not saying you have to have a "lead" paragraph. I'm not even suggesting it's NECESSARY for you to even understand my name "Strunk N. White". But reading your articles should be a straightforward exercise in clear communication, not trying to solve the DaVinci code.

Mike, for the love of pete, please, PLEASE, PLEASE, get an editor or otherwise perform some editorial function on these squirrels you have working for you. The "service" function of reading Techdirt for actual information is all but lost when articles like this appear.
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yoda, 18 Jan 2007 @ 3:47am

FCC responsible only? Simple too, see?
IMO it is a simplification to single out the FCC and blame them (and a perceived lack of competition) for the perceived shortcomings of telecoms here.

It's a fact that in the US, the telecoms competitive landscape is shaped by a combination of Congress (elected officials who pass legislation like the Telecom Act of 1996), the FCC (appointed by executive branch, makes additional 'rules'), and courts (judicial branch, interprets laws and rules). You also have the efforts of telcos to influence all three through lobbying and political process, and a 60-year history of monopoly in the background skewing thinking and expections among policy makers and consumers alike. And of course the revolving door between the private enterprise and Congress and the FCC - to give just one example: Thomas J. Tauke is executive vice president - Public Affairs, Policy and Communications, at Verizon. And quoting from his bio - "a position he has held since May 2004. Before joining NYNEX in 1991, Tauke was a Member of Congress, representing Iowa's Second Congressional District in the United States House of Representatives from January 1979 to January 1991. During his congressional service he was a member of the Telecommunications Subcommittee." What it doesn't say is that in Congress, he played a role in shaping early versions of what became the Telecom Act of 1996, and then VZ hired him to lobby his Congressional colleagues from 1991 through passage of the bill in 1996. (but I digress.)

To those who believe the lack of high speeds and greater broadband coverage in the US is due to a lack of competition, I'd say maybe not. Maybe 'free market' competition is the culprit. In the US, companies are deploying telecom network technology where they can make the most money, first. Later after volume goes up and equipment costs come down, they may expand into lower revenue/higher cost areas (read: poor and rural areas, respectively). Korea and Singapore, among the countries with the highest percentage of broadband coverage, and highest speeds, have it because of a national industrial policy which made it financially attractive to do so, not because of pure open market competition. (And yes it helps that the people are concentrated in very densely populated cities.)

What if Congress has chosen to view broadband for all as a matter of national economic security/industrial policy and mandated a rollout, paid for by a tax? We might have more coverage and higher speeds, and complainers complaining about the taxes and poor people getting something for nothing, instead of criticising the FCC.

There are two kinds of regulation at the extremes. One is profit-driven 'free market' lassez faire, which if applied to broadband would result in underserving poor and rural areas. The second is a government-granted monopoloy, in which case universal coverage could be mandated, but few would be happy about the particulars. What we have in the US is a compromise or blend of the two, which tries to promote broadband via creating profit-driven competition by mandate, with some strings attached.

While I agree there is some disingenuous wording in the AT&T 'concessions' around the definition of 'naked DSL', overall, I am not complaining, I think the system is working OK. I live on the far edge of a small town in a rural area, and have had 6 Mbps cable modem service for about 10 years, and VOIP for two years. In contrast, the phone company has yet to offer DSL service here and is trying to sell its rural assets off, so it can concentrate on richer suburbs and metro areas. That's their choice. I consider myself lucky to have the service I have. I don't download movies or share files, so I don't find myself wishing for faster service. If I did care that much, I could purchase faster service for more money. That's the free market at work.
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a, 18 Jan 2007 @ 11:55am

One Point
AT&T didn't compete with Bell South, so how does acquiring them really change the competitive landscape any?

AT&T buys a cable company? Now thats a different issue.
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dorpass, 18 Jan 2007 @ 12:21pm

Re: FCC responsible only? Simple too, see?
There are two kinds of regulation at the extremes. One is profit-driven 'free market' lassez faire, which if applied to broadband would result in underserving poor and rural areas.

Baloney. By that logic, cell phone companies would not try to enter third world markets. Go back to the drawing boards with that one.
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telcogod, 18 Jan 2007 @ 6:11pm

more clecs bankrupt since TRO not before
and disputes were handled at the state level by the puc. And it's a little late for the outrage. This author is a puppet of the DNC an ignorant clown that blogs for peanuts now that the dims are out for the FCC. It's a little too little a little to late to be helpful to the country you dimocratic bufoons. Where were you when Bush was committing the crime of the century ie the TRO?
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Raymond, 27 Jan 2007 @ 4:37pm

I really want to see the naked dsl service at Midl
We need the naked dsl ,It's good for all customers and will improve the service of phone Company.You have to accept and agree with this.AT&T, go ahead .
We're waiting for you.It's USA Why other countries can do this?How about us?We need the competition.it's very necessary to force we use new
technicology.We don't like to see just one or two providers control the whole market and increase the price each year.
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Raymond, 27 Jan 2007 @ 4:47pm

I really want to see it at Midlothian in VA
We're a big country,It's hard to understand why we don't like to see the good improvement in our country.Because of just one or two company's profit.
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joke, 3 Jun 2009 @ 9:42pm

thanks for all
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