Telecommunications Policy in an IP World

Telecommunications Policy in an IP World

• 1.
  Telecommunications Law
• 2.
  Telecommunications Policy inan IP World TCCFUI Seminar Houston, TX October 18, 2013 PRESENTED BY Nicholas Miller Partner, Best Best & Krieger, LLP Telecommunications Law
• 3.
  Outline •What Principles Apply? •TheTraditional “Social Compact” in Telecommunications •Does IP Technology Change the Analysis? •The Issues and Local Governments Telecommunications Law
• 4.
  Principles for LocalGovernments in IP World • Consumer protection  Protection Against Market Abuses  Minimal Externalities injuring third parties  monopoly power—unfair prices; unfair availability of services  Quality of Life of Community • Economic Development  Balanced tax burden  Efficient use of community resources  Promote innovation  “Server of last resort” Telecommunications Law
• 5.
  Principles for LocalGovernments in IP World • Local Government as landlord/trustee  Largest landlord to industry  Right of Way is the most valuable resource held in public trust • Local Government as user  “Anchor tenant”  Bulk Purchase--More with Less  Fair prices and services to reduce taxpayer burden Telecommunications Law
• 6.
  Some Basic Economics •Governmentshould support “efficient markets”--prices = costs + reasonable return :  Test is ease of market entry  Best evidence of problems is “value of service” pricing: vendor has power to segment market, charging discriminatory prices based on each consumer group’s value of service Telecommunications Law
• 7.
  Some Lessons fromHistory • Telecommunications infrastructure creates substantial barriers to entry • Wireline: economies of scale  no competitive “last mile” infrastructure • Wireless: artificial scarcity  Limited spectrum  limited number of providers  Telcos and Cable Operators behave like railroads: discriminate in prices, services, and areas served Telecommunications Law
• 8.
  The Traditional “SocialCompact” •Essential (voice) services available to all • Universal availability • Long distance averaged within and between states • Subsidize where needed  REA loans  Operating subsidies to rural providers  Rate subsidies for low income households Telecommunications Law
• 9.
  The traditional “SocialCompact” • Competition Where Possible—”Information Services” • Regulation Where Needed—”Telecommunications Common Carriage” • Computer II: regulate transmission facilities (natural monopoly), not software and information services (competitive) • 1982 breakup of Bell System—ownership and control of local monopolies separated from competitive long distance and manufacturing businesses • 1996 Telecomm Act  As local facilities become competitive, forbear regulation; until then, competitive carriers must have access at regulated prices  “Information Services” (over last-mile facilities) are competitive Telecommunications Law
• 10.
  •Does New TechnologyChange the Analysis? • Analog to Digital Transmission Format • Switchboards to Computer Switches • Copper to Fiber Lines • NPSTN to Internet Protocol Networks Telecommunications Law
• 11.
  Short Answer: SamePrinciples; Same Problems • Principles Don’t Change with Technology Change • Technology does change “cost structures”—so monopoly power may be  disrupted or  relocated within the supply chain Telecommunications Law
• 12.
  Fiber and DigitalCost Disruptions • Fiber  reduces initial cost of construction, but only enough to support high density overbuilds  Increases scale economies--costs decline with increased data volume—increasing monopoly power of first builder  Artificial Data Caps • Digitalization and Packet Switching  reduces costs of switching  allows multiple routing within and between networks—if interconnected Telecommunications Law
• 13.
  The Policy StruggleToday • Propaganda vs. facts—  IP technology does not eliminate monopoly power;  Unrestrained monopoly power will harm your community • Providers using 3 step strategy:  Use fiber/coax capacity to prevent overbuilds  Create artificial scarcity to drive discriminatory prices: data caps; refusal to serve  Claim “effective competition” to eliminate carrier obligations Telecommunications Law
• 14.
  Role for LocalGovernments Local Government Interests • Consumer Protection Strategy • • • • Oppose Data Caps Impose Build outs Universal Service Carrier of Last Resort • Economic Development • • • • Non Discrimination Joint Trenching Right of Way Management Regulator-Zoning Telecommunications Law
• 15.
  Role for LocalGovernment Local Government Interests • Landlord/Trustee Strategy • Fair rent paid by all users • Authority to control siting • User • Use Bulk Purchase Power • Authority to Self-Provision • Monitor FirstNet Telecommunications Law