Posted 08/01/2001
The Prisoners' Dilemma
By Jon E. Canis
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You all know the prisoners' dilemma, right? A bunch of prisoners in a prison with walls low enough to scale if they all cooperated. However, if they give in to mutual distrust and attempt to gain advantage over their fellow prisoners, all stay stuck in prison.
That's precisely where we are in the competitive local telecom business. As the financial markets have gotten tougher and CLECs have had to fight harder than ever to grow their revenues, shrink their costs, and reach profitability; we have seen the development of behavior that makes it harder to reach these goals. Some examples:
First, the long-running dispute between IXCs and CLECs over access charges. Decisions by federal courts may bring closure to this dispute by the end of the year, either through settlement or judicial fiat (Full disclosure: this writer represents 17 different CLECs suing AT&T and Sprint, including a recent suit seeking industrywide class action certification).
But, however and whenever it ends, this dispute has been enormously disruptive for both sides. Ironically, the IXCs involved have CLEC affiliates, and most of the CLECs also provide long-distance services. IXCs and CLECs have a 15-year history of working cooperatively on local competition issues, but the hard feelings generated by this dispute severely threaten such cooperation in the future.
Second, the fight between facilities-based CLECs and UNE platform (UNE-P)-based CLECs. The UNE-P carriers have attempted to broaden the FCC's rules to allow them to target additional small-business customers. They are opposed by some traditional CLECs who don't want the additional competition. Never mind that the market for local, long-distance and data services is $750 billion; that competitive local carriers have less than 5-percent penetration; that most UNE-P carriers are deploying facilities; and that most traditional CLECs are--or should be--considering using UNE-P to enhance revenues and achieve quicker market entry.
Third, the FCC has issued highly disruptive decisions on reciprocal compensation, access charges and the agency's ability to engage in retroactive ratemaking. All of these decisions are highly suspect from a legal perspective, and all may be subject to reversal on appeal. Nevertheless, many CLECs refuse to fight them, instead pretending to their investors that they are not adversely affected by the FCC's orders, even while desperately hoping somebody challenges the FCC.
We have, as an industry, descended to a level of unprecedented internecine infighting, as CLECs and IXCs compete among themselves, hoping to be the one that survives the shakeout. The result: We are wasting resources that should be directed to fighting ILECs and bad FCC decisions. More harmful, this Balkanization has partially paralyzed the major competitive local telecom trade associations, as their members gridlock over strategy and policy.
The answer? We should all print out a big sign that says: It's the ILECs, stupid!, and read it every day. In this era of tightened budgets and limited resources, we can't afford to waste time fighting among ourselves.
Jon E. Canis writes a monthly column on regulatory issues.
He is an attorney at law with Kelley Drye & Warren LLP, and can be reached at
canis@kelleydrye.com.
