Forbearance: Oh, What a Relief it Isn’t

By Khali Henderson

It seems in most industries, it gets down to two behemoth competitors. WalMart and Target. Microsoft and Apple. Home Depot and Lowes. Barnes & Noble and Borders.

While it happens over and over, we bristle at the lack of choices even as we patronize these stores. It just doesn’t seem right that there shouldn’t be other options. We applaud the Amazon.coms and the Dells that come in and shake things up – bringing innovation in features, delivery and price.

In telecoms, then, it should not surprise us that consolidation to a few giants is well on its way. Consumers probably can name the likely contenders – AT&T – for the title.

Unlike some other retail entities, these companies built their businesses on rate of return regulation for decades. Competition – bringing innovation in features, delivery and price -- had to be forced by laws and regulations, giving competitors access to those facilities the ratepayers built.

The fight over network sharing has persisted for years and is now coming to a head in the recent spate of forbearance petitions. The FCC is scheduled to issue a decision in July on whether to grant a request by Qwest to no longer be required to provide competitive carriers with just and reasonable wholesale access to its legacy Bell facilities. Qwest has asked the FCC to eliminate wholesale unbundling rules mandated by the 1996 Telecom Act in Denver, Minneapolis, Phoenix and Seattle. The FCC in December 2005 granted a similar request Qwest made for its Omaha, Neb., territory.

Of course, Verizon and AT&T are hoping for a similar relief.

COMPTEL today released a white paper that it says shows how the elimination of reasonable wholesale regulations can curb innovation and competition at the retail level.

Indeed, after Qwest got relief in Omaha, it increased the rates it charges competitors by 30 percent to 178 percent, collapsing the wholesale market there, driving out competitors like McLeodUSA (now PAETEC) that used those wholesale services, thus diminishing retail competition. The Omaha Forbearance experience shows that functioning wholesale markets do not emerge automatically when unbundling obligations are removed.