Report: Deregulation Creates 'Massive Loophole'

WASHINGTON, March 24 -- Legislative and regulatory initiatives to remove regional Bell operating company (RBOC) fiber and "hybrid-fiber" facilities from the unbundling requirements of the 1996 Telecommunications Act will not lead to more broadband deployment, but will instead provide a massive "loophole" for the Bells to exploit their market power and retain their monopoly over the "last mile."

That's the conclusion of "Policy Bulletin No. 3: The Broadband Loophole: Is Symmetrical Regulation in the Face of Asymmetrical Market Power Good Public Policy?" published last week by the Phoenix Center for Advanced Legal and Economic Public Policy Studies.

The bulletin said speculation that RBOCs will begin rolling out fiber optic lines to the homes is "an economic nonstarter." According to Lawrence J. Spiwak, president of the Phoenix Center, "Absent competitive pressures, the Bell company monopolies -- by definition -- will never innovate, cut costs or particularly seek to become efficient, and to expect otherwise is utter folly."

The bulletin also analyzes the implication of a significant victory for the RBOCs contained in the FCC's Triennial Review decision in February: the deregulation of "hybrid" loops, which the FCC describes as "the packet-switching features, functions and capabilities of incumbent LEC loops." This decision, the paper predicts, allows the RBOCs to use their market power to foreclose competitors in violation of the letter and spirit of the 1996 Telecommunications Act -- so much so that, according to Spiwak, "the FCC's decision creates a loophole in the 1996 Act that you can drive ten Mack trucks through."

For more information, visit: www.phoenix-center.org