More Competition is Coming

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Nov 10, 2015

More Competition is Coming

More competition is coming.  This summer, more than 300 businesses wrote the FCC demanding the preservation and expansion of competition policy.  Consumers want more broadband choice, and this FCC is determined to ensure they can get it.
 
Under the direction of Chairman Tom Wheeler, the FCC has issued a groundbreaking tech transitions order, and has launched an investigation into lock-up penalties, terms, and conditions that are undermining network investment and preventing business customers from moving to new technologies.
 
For many of the biggest, oldest broadband companies, change is hard.  After 100 years of monopoly control, they can’t believe their army of lobbyists and think tank writers aren’t able to sell the virtues of protectionist, anti-competition policies.
 
Windstream has a unique voice in the debate, as both the fifth largest incumbent service provider in the country and a leading competitive provider of business voice and data services.  This perspective makes it easy for us to give some constructive advice to our big incumbent friends: Ditch the protectionism of the past, and get with the competition future.
 
Last week, an AT&T company executive became the poster child for protecting monopoly profits when he attacked the FCC, competitive providers, and the business customers we serve.
 
AT&T knows that it can choke off competition – especially for businesses and non-profit consumers that want to connect multiple locations together, such as a schools in a district, a hospital center and remote clinics, or a chain of stores – if it can charge competitive providers high prices to reach most end-user locations.  It's an old incumbent's trick to say competition is OK, but only if the competitor builds the entire network, including the last-mile connection to the customer.  The incumbent knows a complete competitive overbuild rarely can be feasibly done. 
 
That's why Congress and the FCC have recognized that access to unbundled network elements and wholesale leasing are critically important.  These inputs allow total solution choices for businesses, schools, and healthcare clinics when it is not economically feasible for a competitor to overbuild in the last mile.
 
Similarly, AT&T's gripes about "special construction" omit key facts. While competitors continue to invest billions in building out their fiber backbone networks, there are many small and medium-sized business sites where there is no business case for a competitor to overbuild the incumbent’s last-mile connection to the site (
http://apps.fcc.gov/ecfs/document/view?id=60001077348).  In these cases, Windstream is more than willing to pay our fair share of the construction costs for any add-on infrastructure that we require.  But we don't think Bells should be able to double-bill a competitor or force it to pay for infrastructure that the Bell will use to serve other customers.   This is just a way to raise the cost for customers to switch to competitors, keeping Bell customers from going elsewhere.
 
As for the FCC lock-up investigation criticized by AT&T, that’s actually about AT&T's longstanding practice of using its market power to block other companies from investing in IP technologies.  Incumbent providers know that if they can require business and wholesale customers to buy nearly all last-mile connections from them – whether the customer buys a lot or a little – then a would-be new supplier will find no available customers.  And incumbents penalize competitive providers moving to IP by reducing discounts applied to their purchases.
 
AT&T suggests that competitors just don’t understand how volume discounts work, quipping that its discounts are applied like Costco’s to a bulk purchase of tissue boxes.  But if that actually were the case, Costco would be forcing its members to sign a contract committing them to buy almost all of their tissues from Costco, and would be hiking up its retail prices while tissue production costs go down.  In the real world, tissue buyers don’t have to make this sort of draconian deal with Costco, but competitive telecom providers often have no choice but to sign up with AT&T and agree to its terms (however unreasonable).
 
Windstream is in many of the same lines of business as AT&T.  As stated above, we are the fifth largest incumbent provider, as well as one of the largest competitors.  We buy from and sell to many providers, including AT&T.  We operate one of the largest fiber networks in the nation. 
 
Indeed, in this business, it’s invest or die for both competitors and incumbents alike.  That is why Windstream’s investment is up for 2015.  Others in the industry also are investing – in fact, there are some in the media who say that the very largest Internet service providers are investing more than ever (http://arstechnica.com/business/2015/10/comcast-and-other-isps-boost-network-investment-despite-net-neutrality/).  These investments are being driven by competition to meet growing customer demand in the market.
 
The FCC should listen to the many customers embracing these changes, rather than the few large incumbents seeking to stymie further competitive investments and choice.


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