Q&A With the TIA on ’96 Act and Beyond

For xchange’s February cover story package about the Telecommunications Act of 1996 we interviewed a variety of telecom-related association leaders about the Act, how it met and missed expectations, and what key regulatory issues they’re concerned about today. The following is a complete transcript of xchange Editor in Chief Paula Bernier’s Dec. 15 discussion with TIA President Matt Flanigan and TIA Executive Vice President Grant Seiffert. The Telecommunications Industry Association (TIA) is a nonprofit U.S. trade organization that represents providers of communications and information technology products and services for the global marketplace standards development, domestic and international advocacy, as well as market development and trade promotion programs.

                  
TIA President Matt Flanigan  TIA Executive Vice President Grant Seiffert

XC: Prior to and during the Telecom Act of 1996’s creation and passage, what was TIA looking for as far as new legislation?

MF: We wanted some competitors in the service side. That was our whole push. It’s a little bit self-serving. We’ve been nicknamed the arms merchants. We sell to all sides, and we wanted competition to occur in the service provider side of the business. We supported the CLECs getting into the business. We supported the cable companies rolling out equipment or deploying equipment that they could start to provide voice over the cable.

Basically, we were looking for facilities-based competitors – I think that’s the key to it. It’s not just competition by leasing of the lines, because that didn’t really do much. I mean, what they set up was they allowed the industry – because not everybody could start instantly the next day and have facilities-based – so they set up this reason of sharing the lines from the RBOCs so they could resell them. But that whole purpose was a temporary situation until we could get to facilities-based competitors.

Today, we do have many facilities-based competitors. And so I think the Act in that sense did achieve what it set out to do.

XC: So your overall impression of the Telecom Act of 1996 is favorable?

MF: Yes, I see it in a favorable light because I think today we no longer have monopolies that are controlling the voice path. We have now numerous types of services that I don’t believe that under the old regime we would have today. So I think it opened up new opportunities, new types of equipment and new types of services that consumers have benefited immensely from because of the Act. I also think it helped to deploy broadband.

As a country we’re still rated to be slower and behind other countries, but we are catching up rapidly, and I think a lot of what happened in the ’96 Act started the process to get broadband deployed out there. The last number I heard was well over 40 million homes out of 100 million now have broadband opportunities.

XC: What negative effects, if any, did the Telecom Act of 1996 have?

MF: I think what happened, the negative thing, was the downturn of the telecom industry in the ’99, 2000, 2001 time frame. I don’t necessarily blame the Act, but what happened was obviously everyone was buying fiber and we had too much fiber out there for the early years.

In addition, it was Y2K, everybody was panicking about that. Lots of new equipment was purchased in ’99 to 2000. That turned out to be not so real – the Y2K was not a problem, everybody’s computer did not shut down at the stroke of midnight at ’00.

So I would say the Act maybe had bad timing with the overabundance of equipment sold in ’99 and also the fiber that was being rolled out in huge quantity – everybody was buying fiber.

As it turned out, that has come back now in the past two years. Fiber is once again up considerably and it’s up in ’04 and ’05. And it’s mostly up for two reasons. One, the RBOCs are now buying fiber again because they need to roll it out to deploy video, which is very crucial for them to maintain their positions. Number two is municipalities around the United States are buying lots of fiber to give their local citizens access to local broadband. So fiber sales are up considerably in double-digit growth for the past two years.

XC: What are the prospects we’ll see a new Telecom Act in 2006?

MF: I think we will see a new Telecom Act in 2006. The market desperately needs it, mostly because of the uncertainty that’s out there right now. Wall Street gets nervous not knowing what customers are going to be able to do – both service providers and equipment providers. So I think we will have an Act. We work very closely with Chairman Barton, and we do believe he’s going to try to push an Act through, as well as the Senate side. I think the chances of an Act occurring in ’06 are very good.

XC: What are you hoping that piece of legislation will address?

MF: The issues of getting a level playing field now for all service providers. I don’t think we have the problems any more that the RBOCs have a monopoly. I think the fact that the cable companies are now rolling out voice, they actually have a lead in certain areas. If you talk about video, they’re surely leading; the RBOCs need to roll out fiber to catch up with them.

The wireline industry is still losing lines everyday. It’s single-digit loss, but it could continue, and it will continue. And the wireless is really almost the third provider.

Wireless is projected to surpass wireline in early ’06. So the number of wireless subscribers will be greater than wireline subscribers. And I don’t think anybody thought that would’ve happened five years ago. I think the fact that they’re now offering voice, video and data, you now have three ways you can get your phone service now – you can get it on your traditional wireline, you can get it on wireless, or you can get it on cable. And the truth of the matter is, in the not-too-distant future, you’re going to get it over your electrical lines. And VoIP is making all this possible today.

XC: What’s the status of Broadband Power Line?

MF: There are a lot of tests going on right now. There are some successes and some failures. Several of our manufacturers are involved in these tests. I would say it’s still probably a few years away from really rolling out and being the fourth supplier of voice. I think it will happen; it’s probably going be more limited.

Of course, what everybody really wants is wireless. Wireless is growing – double-digit growth – and you can now get your wireless anywhere you are. You get voice, video and data over that. You’ve got to really question why you would go with anything else.

XC: What are the key regulatory issues – at any level – that TIA is most concerned with today, and why?

MF: Franchise taxing – where the wireline carriers can go into an area and be able to offer video without having to jump through hoops and meet all the local franchising requirements, and either do it on a statewide basis or a federal basis. I mean, we'd prefer federal. If they have to do this county by county, it's really going to put them at a disadvantage, and I think consumers end up losing then.

GS: There’s legislation in the Senate, that isn’t going to go anywhere this year. But what’s more important is that the FCC simultaneously is looking at their legal authority – whether they can make a federal change to the current franchise structure now.

MF: And if they do, that will obviously put a lot of pressure on Congress to incorporate that.

XC: What are TIA’s other key initiatives these days?

GS: We are also looking to increase the current dollar amount of federal research dollars that go into communications.

MF: The board felt this was so important that we created for the first time in 10 years a new division within TIA called the Communications Research Division. And it basically had to do with companies in the past – we all know Bell Labs, but there are others just like that that have spent millions of dollars every year on development of research. What’s happened with the telecom downturn in the early 2000 to 2003, these companies really had to cut those engineers out, and they have not been able to hire them back because they’re not what they were before, these companies. Lucent and Nortel, they’re one quarter of the size they were five years ago. Because of that we’re not doing research in this country any more. There’s a lot more research being done offshore in other countries, in China, and the concern here is that we’re going to lose this technology advantage the United States has had.

So we’re going back to Congress and asking them to include in some of these bills either some additional research dollars or to rechannel the research. Right now the research is about $1.1 billion a year. But this is on anything from health care to – everything you can think of – transportation. And there’s only $100 million spent on communications. So we’re trying to increase $100 million to $500 million. It’s a step in the right direction. It will help create jobs in the future and keep communications research where it belongs in this country.

TIA www.tiaonline.org

Share this article: Email, Slashdot, Digg, Del.icio.us, Yahoo!MyWeb, Windows Live Favorites, Furl
Add this article feed to: RSS, My Yahoo, Newsgator, Bloglines