13 November 2001

Disconnect: Bush, the Baby Bells and the Crash Long piece by Karen Kornbluh in the Washington Monthly which neatly brings together the complex strands of broad band rollout in the U.S. She echoes what I've read in the London Financial Times (sorry, no link to their article some months back), that the cost of the telecoms crash dwarfs the bursting of the dot.com bubble: "But it's clear that the economy was already in trouble, and that the telecommunications sector was at the heart of the problem. Consider this: The drop in market value among telecommunications service providers and equipment makers accounts for more than 90 percent of the net loss in stock wealth since the spring of last year, according to an in-depth analysis by The Wall Street Journal." She also makes a damning case against the Bush administration for failing to take action to force the Baby Bells to honour their obligation to open up the last mile to competitors. However, she suggests a radical solution: "But there is a way to give each side what it claims to want---competition and deregulation---while leading to faster diffusion of broadband and greater economic growth. The solution is to end the Bells' stranglehold over the "last mile" of wiring by forcing them to divest themselves of the physical wires, much as AT&T was forced to divest itself of its local phone monopolies. The beauty of divestiture is that it would create all the proper incentives. The companies that own the wires will be eager to cooperate with the providers of retail services---including DSL, Internet access, or local voice service---because neither could serve the customer alone. Divestiture would turn the Gingerbread Boy into the fox's life jacket. Government wouldn't have to be in the business of constantly enforcing complex rules of fair conduct. It would only have to regulate the prices that the owners of the wires charge. Divestiture of the local monopolies spurred enormous innovation as well as higher investment and lower prices in the network's long distance sector. The same would likely follow divestiture in the local market." This article via the highly recommended Joho, by David Weinberger. 8:59:40 AM