The last mile

It’s been five years since the historical Telecom Act of 1996, the first major overhaul of telecommunications law in more than 60 years.

As with all deregulation efforts, the idea was to open up the communications market to stimulate investment and market competition. Everyone saves or makes money, and all is right with the world, but as we know, that is not always the case.

“It (the Telecom Act) was to create a piece of legislation to stimulate the opening up of the local market by the ILEC — Incumbent Local Exchange Carrier — to competitors, and in return for opening that market to competition, Congress wrote in language that would let them have long distance entry,” explains Doug Kinkoph vice president of regulatory and external affairs of XO Communications. “That is really the core gist of the Telecom Act.”

As far as investment dollars are concerned, for the most part the act has been successful.

“We have seen about $29 billion dollars that has been spent to build up broadband communication infrastructure in the U.S.,” says Kinkoph.

A great deal of those investment dollars has been spend on the increasing demand for new communications technology.

“They leapfrogged much more quickly than what it would have been if it had remained a monopoly,” says Kinkoph

However, as we have seen, deregulation is not as easy it sounds. In the case of telecommunications, there are three aspects of service — long distance, which has been deregulated since the ’80s; local service and the infrastructure; and last “last mile,” the physical lines that lead to a residence or commercial building.

The issue is that even in the atmosphere of deregulation, Ameritech not only competes in the long distance and local markets but also controls the infrastructure its competitors must use.

“They have the best of both worlds, still a monopoly,” says Kinkoph. “The Bell companies have a 100-years head start and monopoly environment that guaranteed returns for them to build out that last mile of their infrastructure.”

The other issue is in the ever-changing world of technology and telecommunications.

“When the Telecom Act was passed, this was a voice world for the most part,” says Kinkoph. “Over the years, everything was viewed as voice — that’s what is regulated, and it is static.”

The line between what is regulated and what isn’t has been blurred.

“There are all these thin lines. It has rocketed past the existing regulations,” says Kinkoph.

The problems of supply, confusing regulations that inhibit competition and companies scrambling for market share are familiar. Much as with other deregulation processes, there are many complicated issues. Even after five years, the telecommunications industry continues to grapple with the same problems recently seen with the newest round of utility deregulation.

It is a long and arduous process, and Kinkoph warns it should not necessarily be sped up.

“We are not at the point where we can open the local markets or where we can say. ‘Let’s deregulate’ without considerable backsliding. We would have the virtual monopoly deregulated, which will crush the competition, and that’s why it is a process of deregulation like it was with long distance.”

Kinkoph explains that XO would like to see fewer regulations and more clarification of the existing laws in order to continue the deregulation process.

“Will regulations every catch technology? I hope it never does. That would mean that we have slowed in our technology development.”
How to reach: XO Communications, (614) 416-1148