Monday, October 31, 2005 - The Progress & Freedom Foundation Blog

The Naked and the Dead

Reportedly, the two Democratic FCC commissioners want to put the kibosh on the SBC/AT&T and Verizon/MCI mergers until the parties "voluntarily" agree to offer "naked DSL"--at which time the FCC would embody the "voluntary" commitment in an order approving the merger. This is an good example of what is wrong with the FCC's merger review process.

In a May 30 piece in the National Law Journal, I wrote about how the merger process "has been characterized by a whiff of regulatory extortion resulting from the imposition of merger conditions unrelated to compliance with existing statutory requirements or rules." I was just being polite when I said "whiff"!

In this instance, the question of whether a "naked DSL" offering should be a condition of merger approval--that is, a mandated unbundling of the telco's local service--is unreleated to any competitive concerns uniquely implicated by the merger. None of the parties on either side of the merger generally was offering naked DSL before they got together, so, without a condition, there would be no less naked DSL offered after merger approval.

And the Commission has thus far refused to require in any generic rule or policy an unbundled DSL offering. So obviously such a condition is not required to bring the merger applicants in compliance with any statutory or regulatory requirement. (As a matter of policy, in today's competitive environment, such mandatory unbundling should be dead because it stifles the incentive for new facilities investment and for innovation in new service applications. We want real facilities-based competition, not government-managed and regulated artificial competition.)

This long-standing abuse of the merger process to impose conditions unrelated to competitive concerns should be dead too. In our DACA project, the Regulatory Framework group proposed to do away with the FCC's authority to use the rubric of the indeterminate "public interest" standard to impose conditions unrelated to merger-specific competitive concerns. Although it is clear in this instance Chairman Martin and Commissioner Abernathy would prefer otherwise, with the Commission divided 2-2, the agency probably is about to serve up some more exhibits in the case of communications policy reform.

posted by Randolph May @ 11:00 AM |