Major local phone companies remain bitter that the Federal Communications Commission has failed to strip away regulations in the face of growing competition from wireless carriers, cable companies and over-the-Internet phone products.
The dismay was on display last week at the United States Telecom Association convention in Las Vegas, where hundreds of executives converged to discuss the impact of the FCC's latest batch of rules.
The tone was set by USTA president Walter McCormick, who has repeatedly complained that problems within his industry — losses in jobs, access lines and market capitalization — were the direct result of FCC policies.
"The rules under which our companies operate are written for a world that no longer exists. It is more befitting the old Soviet Union than the world's leading free-market economy," McCormick said, according to the text of his remarks.
The USTA represents hundreds of small and midsize carriers, plus three Baby Bells — Verizon Communications, BellSouth Corp., and SBC Communications Inc.
Its latest setback occurred in August, when the FCC reaffirmed support for a policy called UNE-P (Unbundled Network Element Platform), which allows competitors to lease the entire network (including the loop, switch and transport) at deep discounts.
AT&T Corp. and MCI Inc., two of the biggest users of UNE-P, managed to persuade Republican FCC member Kevin Martin to side with Democrats Michael Copps and Jonathan Adelstein in order to block FCC chairman Michael Powell from abolishing UNE-P without a transition supervised by state regulators.
The FCC voted to preserve UNE-P for the residential market but not for the business market. The agency also delivered some broadband relief for the Bells and agreed to eliminate line sharing for competing digital subscriber line (DSL) providers.
Still, USTA continues to blame UNE-P for distorting the market, claiming uneconomic wholesale rates give neither incumbents nor UNE-P-dependent competitors an incentive to invest in better facilities.
"This command-and-control regulation, the disparate treatment of functionally equivalent services is not a recipe for the development of the strong infrastructure that is needed for this nation," McCormick said in the text.
Local phone companies matured as legally protected monopolies, but now face competition from cellular phone companies with 142 million subscribers. Local telcos are also are chasing cable companies for high-speed data subscribers and bracing for cable's broad entry into the Internet phone calling business.
"Consumers have a choice. And where they have a choice, where there is competition, there is no need for the surrogate of economic regulation," McCormick said.