As we noted a few weeks ago, Qwest is currently laboring under a federal requirement that keeps its wholesale services below cost. And Qwest’s competitors just love it that way.
The Telecommunications Act of 1996 established a means whereby the Federal Communications Commission could allow a company (such as Qwest) to compete freely - if and when it could be demonstrated that there is sufficient competition for services to free the company from being required to subsidize its competitors.
On Sunday, The Arizona Republic weighed in on the issue, and it will come as no surprise to learn that the newspaper was both ignorant of the facts and incoherent in its conclusions. It will also come as no surprise that the newspaper advocated the continuation of the heavy hand of government regulation.
“In most big markets,” The Republic opined, “including the Phoenix metropolitan area, big-dog telecom firms still control the vast majority of the marketplace, including the part known as the “last mile” of service: the vast network of hardwired infrastructure that extends from switching stations to individual homes and businesses.”
That is false.
The competitive telecom market in Phoenix now includes cable-based providers such as Cox, wireless carriers such as AT&T, Verizon, Sprint, T-Mobile, Cricket, etc, over 40 voice over internet providers such as Vonage, Packet8, Lingo, etc In addition, Qwest competitors are actively using their own networks (such as AT&T, Integra, XO, etc) or network components leased from others (with wholesale network providers including Cox, Salt River Project, Time Warner Telecom, AT&T, and Level 3.
These are all alternatives to Qwest’s “last mile” network. Competitive telecom services - landline, wireless and voice over internet providers – can all be delivered to homes and businesses without reliance on Qwest’s network.
“The FCC granted Qwest forbearance of its pricing requirements in 2005 in the Omaha, Neb., metro area,” continued The Republic, adding, “According to a study commissioned by Qwest competitors, the Omaha forbearance resulted immediately in higher wholesale prices, higher retail prices and changes in market competition that both drove out smaller competitors.”
That is false.
The only competitor that has announced intentions to leave the Omaha market is McLeod, which announced it was withdrawing from only the residential and small business markets, and McLeod’s customer base in those segments in Nebraska has been sharply declining for years - well before the Omaha forbearance order was issued.
No competition in the Phoenix area?
Please.
Between 2000 and 2007, Arizona’s population increased 23 percent. Should not this growth have fueled an increased demand for Qwest’s residential and business telecom services? However, between 2000 and 2007, Qwest’s access line base decreased by 38 percent in Arizona. In other words, not only is Qwest losing the customers it once had, it is also losing the opportunity to serve new customers moving into Arizona - for the very reason that those people are opting to sign up with a competitor.
Again, it is no surprise that The Republic got it precisely wrong. It is also no surprise that the newspaper is afraid of the essence of free markets and vigorous competition - the very dynamics addressed by the 1996 Act.
Congress required phone companies to provide artificially low prices for its wholesale telecom services to “jump start” telephone service competition. But, it also stipulated once competition was robust, the companies could seek relief from that requirement.
Qwest is doing just that, in the vortex of swirling competition. The Republic doesn’t get it, of course. But, the FCC should.