The state of telecom competition

The U.S. Departmentof Justice today published a report based on remarks made ata symposium held a year ago.

A lot can happen in a year,especially in the telecom industry, and this report raises questions asto whether satellite providers will compete with WiMAX vendors to offerbroadband services to customers in rural areas.

Oneof the speakers was William Wallace of DigitalBridge CommunicationsCorp., who said WiMAX is “highly capital efficient,” at $40 to $60 perhousehold, compared to $800 to $1200 for DSL or cable companies.DigitalBridge’s target market was communities of 10,000 to 100,000people.

The report, dubbed U.S. Department of Justice, Voice,Video and Broadband: The Changing Competitive Landscape and Its Impacton Consumers (November 2008),noted satellite services areattractive mainly in areas where alternative broadband suppliers arenot available. One participant in the symposium, WildBlue, said 70 percent of its customers live in areas with 30 or fewer homes per squarekilometer.

Another technology that could potentially competewith incumbent carriers is broadband over power line, but the DoJ notesthe technology “has not achieved much success.”

At the time ofthe symposium, 10 Mbps BPL was new, and utilities were “not convincedthat BPL was a good investment given the cost to roll out a network andthe need to compete for subscribers against established broadbandproviders.”

What does the DoJ plan to do to help competition?

Thereport states the DoJ is “committed to enforcing the antitrust lawsagainst conduct that harms competition in the telecommunicationsindustry.”

“Assessing the legality of conduct under theantitrust laws requires both an understanding of how customers view anduse services and the impact of consumer behavior on pricing decisions,”the report stated. “The Department recognizes that those assessmentscan be particularly complex in the telecommunications industry in viewof technology and other changes and will continue to take them intoaccount in its enforcement decisions.”

The report also says it may review the “competitive implications of bundled pricing,substitution patterns, and quality-adjusted pricing trends.”

Participantshad varying perspectives on competition, but one section of the reportshowed customers south of the border are in the same boat as Canadians.

“Concerns were raised relating to whether incumbent telephone providers should berequiredto make portions of their networks, particularly last-mile connections,available to competitors to facilitate additional entry,” the reportstated.

It noted incumbent carriers “argue that requiring (localloops) be made available encourages entry that would otherwise notoccur due to the high cost of building last-mile facilities.”

Well, yeah, that was the whole point of unbundling the local loops, wasn’t it?