The Broadband Conundrum
August 1 2005 by Edward E. Whitacre Jr.
The great thing about competition is that it’s so democratic: If you build a better product or service that costs less and performs better for your customer, you’ll grow and prosper. If you don’t, the marketplace will show you the door.
When regulations adapt to the rapid advances in the marketplace and in the technologies that allow us to deliver great new products and services, everyone wins. Companies innovate and invest in groundbreaking technologies, tackling new markets and introducing powerful products scarcely imagined a decade ago; customers enjoy greater value, efficiency and convenience at a lower cost; and the U.S. economy gains important ground in the race for global competitiveness.
But when rules governing how industries can operate and compete outlive their usefulness, the outcome is not so democratic, and no one really wins. Businesses stop investing and innovation lags, as does competition that could bring more options and better value for customers.
This is the conundrum we face today in the communications industry, a sector that has been literally transformed in the last 10 years by new technologies and exploding competition.
Today, customers can satisfy their needs for phone service, home entertainment and data through phone companies, wireless providers, cable operators, new Internet-based service providers and even electric utilities. This broadening in delivery choices has been accompanied by an exponential increase in the number of providers competing for market share, bringing greater choice, new services and lower prices for customers.
The explosion of the wireless market is testament to what can be achieved when regulators step back and let the market do its work: Late last year the number of wireless phones in service domestically surpassed the number of traditional land lines-after just two decades of sales to the mass market. Today, road warriors can use their laptops and a WiFi or cellular connection to send data around the world, and their kids can use a relatively inexpensive wireless phone to take and email photos to their friends.
But legacy providers are straining under regulation that newer companies offering a nearly identical service via the Internet or some other technology are not subject to. Regulated telephone companies, for example, are losing customers to cable and other providers offering virtually unregulated, untaxed voice service via VoIP, or Voice over Internet Protocol.
Ironically, as phone providers are using the same new IP technology to get in the video business, cable companies are crying foul and seeking to saddle telecom companies with rules intended for a monopoly cable business, such as franchise agreements.
What’s fair for one group should be fair to the other. But more to the point, what will benefit customers and the marketplace most is less regulation, not more.
The challenge of keeping regulation equitable and relevant in a rapidly changing world is certainly not new: CEOs in industries like oil and utilities have struggled for decades to bring regulation up to date with changes in technology. The regulatory lag has resulted in continual price volatility and fewer supply options.
But nowhere is it being felt more acutely today than in the rapidly growing communications sector.
Regulation that was conceived back when the only reliable provider was a regulated monopoly must change to recognize the almost unlimited choices available today. Outdated government oversight hinders investment and innovation, and also penalizes companies that are at a regulatory disadvantage for no other reason than they’ve been faithfully serving their customers longer than the newer kids on the block.
The answer is simple: Let customers pick the winners and losers. Encourage new investment and competition with forward-looking regulations that recognize the exciting realities and unlimited possibilities of the 21st century marketplace.
Edward E. Whitacre Jr. is chairman and chief executive officer of SBC Communications Inc., San Antonio, Tex.