[It's rare that I post a Press Release verbatim, and you can rest assured that when I do, it's significant. I think this letter sums up the current situation pretty well. Note the reference to additional license-exempt spectrum. - SKS]
TELECOM GROUP URGES FCC: LET TELCOS FAIL FAST
LETTER TO CHAIRMAN CITES "NATURAL PROCESS"
Washington, DC, October 21, 2002 - An influential group of Internet analysts and business executives today urged the Federal Communications Commission (FCC) to let failing telecom companies fail, and "fail fast."
The 41 signatories, led by independent telecommunications analyst David S. Isenberg, said in a letter to FCC Chairman Michael Powell
that Internet-based technologies are subsuming the value embodied in the traditional telecommunications networks. According to the group, "This is causing the immediate obsolescence of the vertically integrated, circuit-based telephony industry of 126 years vintage. [Telephone company] bonds used to purchase now-obsolete infrastructure assets have become (or are inexorably becoming) bad debt."
The group urges the FCC to resist telephone company pressure tactics to prop up businesses that technological progress has made obsolete, in order that advances in newer, better forms of communication not be stifled. Calling the current telecom troubles "not a disaster, but a natural event," the letter says a "revolution in productivity and human benefit as big as the agricultural and industrial revolution" could result.
"Too many business analysts are talking about bubbles and over-leveraged balance sheets as the root cause of current telecom troubles," said Isenberg.
E.g., said Isenberg, commenting on the letter, "This confuses the symptoms with the disease. These things are just symptoms of the fact that Internet technology has made phone companies obsolete. If the government tries to treat the symptoms, the American economy will actually stay sick longer than if the natural process is allowed to run its course."
The proper course, according to Isenberg, is to write off all circuit-based telephone assets to reflect their obsolete value, and re-capitalize the industry with as little government intervention as possible. "People will continue to use the existing telephone network for years to come, just as
people still rode in horse-drawn carriages for years after the automobile was invented. But the government never subsidized buggy whip makers, and it should not subsidize telcos now."
Included in the letter are four recommendations to the FCC:
- Resist at all costs the telephone industry's calls for bailouts. The policy should be one of "fast failure."
- Acknowledge that non-Internet communications equipment, while not yet extinct, is economically obsolete and forbear from actions that would artificially prolong its use.
- Discourage attempts by incumbent telephone companies to thwart municipal, publicly-owned and other communications initiatives that don't fit the telephone company business model
- Accelerate FCC exploration of innovative spectrum use and aggressively expand unlicensed spectrum allocation.
Isenberg said that this point of view has evolved over the last several years among the signers, and has been reinforced by market activity. "The results of the new Internet technology on the old are there for all to see in the industry stock prices. We just want people to think clearly about how to move forward for the greatest public benefit."
Contact:
David Isenberg
Principal Prosultant(sm)
Isen.com
1 908 875-0772
1 908 456 4006
isen@isen.com
(Prosultant is a service mark of isen.com, LLC)
Matt Oristano
President
Alda Inc
1 203 389 7407
matt@aldainc.biz
David Weinberger
Editor In Chief
Journal of the Hyperlinked Organization
1 617 738 8323
self@evident.com
LETTER TO FCC CHAIRMAN MICHAEL POWELL
The Hon. Michael Powell
Chairman
Federal Communications Commission
Dear Mr. Chairman:
We thank you for your leadership in FCC efforts to understand the causes of the current telecom debacle, and especially for
convening the FCC's October 7, 2002, Telecom Recovery En Banc hearing.
We were dismayed that several of the En Banc speakers confused causes with effects. We believe that balance sheet weakness, long-haul overcapacity, and even the recent speculative bubble, are effects, not causes. If we attempt to treat the symptoms, we risk missing the causes and prolonging the agony.
We hold that the primary cause of current telecom troubles is that Internet-based end-to-end data networking has subsumed (and will subsume) the value that was formerly embodied in other communications networks. This, in turn, is causing the immediate obsolescence of the vertically integrated, circuit-based telephony industry of 127 years vintage. CLEC, IXC and ILEC bonds used to purchase now-obsolete infrastructure assets have become (or inexorably are becoming) bad debt. Weak last-mile competition prevents the most powerful technological advances from reaching all but a few customers; this is the largest cause of long-haul over-capacity.
One En Banc participant, NYU Professor Larry White, had views that seem consistent with ours. He recommends that we let firms that are failing fail as quickly as possible. We believe that it would be harmful if government actions prevent, delay or interrupt this evolution. It must proceed if the United States is to continue to be a leading contributor to communications progress, and if its citizens are to benefit from the technologies that are now available and the applications that they enable.
The telecom debacle is not a cyclical phenomenon. The telephone network's technological base, and the business model under which this old technology thrived, are obsolete. Recovery is not an option. We can only move forward; how far and how fast will be determined by our continued freedom to innovate. Let the United States learn by not duplicating the Japanese banking experience in the telecom arena.
We need to see the current situation not as a disaster, but as a natural event; part of a revolution in productivity and human benefit as big as the agricultural and industrial revolutions.
Given these views, we urge the FCC to:
- Resist at all costs the telephone industry's calls for bailouts. The policy should be one of "fast failure."
- Acknowledge that non-Internet communications equipment, while not yet extinct, is economically obsolete and forbear from actions that would artificially prolong its use.
- Discourage attempts by incumbent telephone companies to thwart municipal, publicly-owned and other communications initiatives that don't fit the telephone company business model.
- Accelerate FCC exploration of innovative spectrum use and aggressively expand unlicensed spectrum allocation.
Mr. Chairman, we note with gratitude your impatience with antique regulatory structures, and your attempts to embrace new technology. Also, we acknowledge the burden inherent in the FCC's duty to ensure the continuity of communications, especially basic dial-tone continuity, in the face of such changes; we are prepared to lend assistance as the FCC grapples with this issue. Notwithstanding, we urge you to continue against the inevitable onslaught of those seeking to preserve an impossible status quo.
Sincerely,
Izumi Aizu, Asia Network Research
Jay Batson, CEO, Pingtel
Robert J. Berger, President, Internet Bandwidth Development, LLC
Dan Berninger, pulver.com
Scott Berry, telecommunications consultant, Darien CT
Michael Bialek, President, InfoComm Inc.
Scott Bradner, Harvard University
Richard Campbell, Worcester Polytechnic Institute
Douglass Carmichael, individual, dougcarmichael.com
Judi Clark, individual, ManyMedia.com
Anders Comstedt, Managing Director, Stokab
Gordon Cook, publisher, The Cook Report on Internet
Timothy Denton, Internet attorney, tmdenton.com
Greg Elin, independent software developer
Tom Evslin, CEO & Chairman, ITXC
David J. Farber, Moore Professor, University of Pennsylvania
Bob Frankston, individual, frankston.com
Dewayne Hendricks, CEO, Dandin Group
Roxane Googin, editor, High Technology Observer
Charles W.K. Gritton, President, Broadsword Technologies, Inc.
David S. Isenberg, Principal Prosultant(sm), isen.com, LLC
Johna Till Johnson, President, Nemertes Research
Peter Kaminski, individual, peterkaminski.com
Shumpei Kumon, Executive Director, GLOCOM
Bruce Kushnick, Executive Director, New Networks Institute
Andrew Maffei, individual, Falmouth MA
Jerry Michalski, sociate.com
David Newman, President, Network Test Inc.
Matthew Oristano, former CEO, SpeedChoice, People's Choice TV
Mark Petrovic, individual, Pasadena CA
Jeff Pulver, founder, pulver.com
Frank R. Robles, CEO, Neopolitan Networks, Inc.
Charles Rybeck, Managing Director, Benchmarking Partners
Paul Saffo, individual, pls@well.com
Doc Searls, Senior Editor, Linux Journal
Clay Shirky, telecommunications consultant, shirky.com
Porter Stansberry, publisher, Agora Inc.
Ted Stout, CEO and founder, The ROI Institute
Brough Turner, CTO and co-founder, NMS Communications
David Weinberger, co-author, Cluetrain Manifesto
Kevin Werbach, technology analyst, Supernova Group LLC
Followup 10/22/2002:
I was asked to sign this letter, and because it is entirely consistent with my observations of the telecom industry, I agreed. I was quite honored to be invited to sign. It was unfortunate timing that I was was out of town without access to email when I received the invitation to sign, and by the time I was able to reply, the letter had been sent. While the version actually sent to FCC Chairman Powell did not include my signature, the version on the web page "The Paradox of the Best Network" - www.netparadox.com (now linked at left) does include my name.
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