Upon receiving an invite from an associate to spend the evening in the Bedouin’s tent with a lady of his choice, James Bond quipped, “When in Egypt, one must dig deeply into her treasures.” Next to Goldfinger telling Bond he expected the British agent to die, I don’t remember to many lines from the movie series, but the Egypt line stood out when I read this latest Federal Communications Commission order released earlier today.
The FCC clarified that price capped local exchange companies (phone companies not subject to rate-based regulation) must use a portion of their frozen high-cost support either to recover the cost of past network upgrades to extend broadband-capable networks in areas substantially unserved by an unsubsidized competitor or to maintain and operate existing networks in such areas, or a combination of the two.
I’ve always thought of price capped carriers as the big brothers that went off to college or the Army while the little brother rate-based carriers were left at home to sulk. Price capped carriers received their designations during that period where competition was thought to be right over the horizon. Given shrinking market shares and the argument that an alternative regulatory scheme was needed to unleash completion in the local markets, price capped regulation was given a try.
It seems this time that big brother prefers keep the gloves on and the FCC is willing to acquiesce. The FCC is willing to let these price cap companies maintain two networks; a broadband network and whatever legacy network existed before that was being used to serve rural customers.
For example, FairPoint, one of the original petitioners that spawned the issue addressed in the order, serves mostly rural customers. The company did not want to allocate one-third of frozen universal support to broadband deployment. That position flew smack in the face of the FCC’s plan to connect rural households to the high-speed broadband. But with this order, FairPoint gets to have it both ways.
Either market intervention via universal service doesn’t appear to bring about the broadband social policy goals the FCC wants or the FCC may have to be firmly restate that it promotes an IP transition. The FCC acknowledges the costs of maintaining two networks in this order. It should move to have all carriers pursue that goal. The treasures of an IP transition demand it.