Telepocalypse

Rethinking regulation

I was reading this old article at Tech Central Station, and noodling about what it was saying. In a nutshell, it is arguing that the 1996 Telecom Act is fine as it stands, just that it was badly implemented because incumbent telcos are allowed to charge excessive wholesale rates.

I completely disagree. Most regulation seems to be about trying to directly fix outcomes rather than let the market take its course. A monopoly supplier of telecom that charges high prices should be sending a price signal that encourages new entrants into the connectivity business. Telecom is not a natural monopoly. Cable, municipal fiber, MMDS, satellite, meshes — they are all viable alternatives, and more are on the way.

What the regulators need to do is prevent discriminatory pricing against newcomers. I would therefore propose that most of the existing regulations be scrapped and replaced with a much simpler framework. The goal would be to prevent predatory behaviour. The ability of incumbents to price differently according to geography would be restricted - a price drop when a new entrant arrives would have to be given to all. Additionally, I would consider restricting the ability of incumbents to drop prices following the arrival of a new entrant, for maybe a period of two years. That would encourage price moderation at the outset, and make a stable business environment for new entrants to form a business case against.