Communications / Regulation

“Can you hear me now?” AT&T Carries the Voice of Reform to the FCC

Perhaps no one likes being told that the world has passed them by or that their sun may be setting. The Federal Communications Commission (FCC), at 78, has recently come under heavy criticism from those who have labeled the organization a curmudgeon that has failed to keep up with technology and is now in the way of change, rather than helping to facilitate the well-intentioned growth of the U.S. communications infrastructure. As millions of Americans continue to permanently hang up their copper wired, hard-line home telephones, the FCC must reevaluate its role and evolve its antiquated regime of regulation.

The FCC, for its part, has convened a taskforce of market participants and regulatory professionals to discuss the need for reform in the communications regulatory apparatus as the country continues its internet protocol (IP) transition. At the heart of this debate is AT&T, a direct descendant of the Ma Bell monopoly, whose industry reign was shattered in 1984. AT&T has led the call for reform and greater flexibility for market participants to pursue growing alternative communication platforms. AT&T is one of many communications industry entities that now view IP and wireless services as the future of global communications.

AT&T begins its argument by quoting irrefutable statistical growth in wireless use across the United States. The telecomm giant submits that as a result of the growth of the big data nation, the communications industry has been incredibly fast-paced, specifically pointing to their complete overhaul of corporate product models. Where once AT&T marketed the sale of cellular minutes, it is now understood that what the consumer wants are ‘bits,’ access to digital networks and the capability to interface with the internet across multiple platforms. While industry competitors and investors have struggled to keep pace, it appears that FCC has barely even tried.

The problem for the older industry participants that initially helped hard wire America for phone service is that many are still subject to legacy rules of the FCC. These rules were designed to protect the American consumer during the growth of the telecommunications industry by ensuring access across the country to critical telecomm services such as emergency response utilities. This “Social Contract Theory” helped regulate the communications industry in the middle part of the twentieth century, but its lingering existence now endangers the economic health of the industry. Remaining in good regulatory standing means that AT&T must continue to service its outdated copper wire systems that are being increasingly left behind by consumers switching to broadband and other IP services.

For Wall Street these former behemoth corporations become less attractive because, despite their stated fervor to invest in expanding consumer access to IP services, capital is continually being spent maintaining a social contract made long ago for technology services no longer relevant. These companies therefore are forced into a competitive disadvantage in markets shared by cable providers who offer similar services without being subject to these FCC regulations. The FCC, it is argued, has missed the big picture in continuing to hold to the belief that hard-line service is not in direct competition with IP platforms. The reality is that consumers are driving the market by switching to broadband and wireless services at the expense of traditional hardline services. The consumer has made the choice to toss out his or her old home phone and live life almost exclusively in the digital world.

AT&T has asked for waivers to various regulatory provisions to transition several of its service centers to complete digital infrastructure. In a city that often makes a living on high theory, this small-scale experimentation is a welcome proposal that the Washington D.C. headquartered FCC should not ignore. The quality of AT&T’s ability to fulfill its social contract obligations without maintaining its antiquated infrastructure will provide critical information for the FCC to digest as it redefines its role as a regulator. The FCC still has an important role to play by ensuring that the telecommunications industry provides the basic services the country needs to exist in safety and grow. That said, if the commission fails to reevaluate its regulatory framework, the day may be coming when it’s time to pull the plug.