Group Says Let Telecoms Fail -- and Quickly

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Forget the regulatory rules that would, or would not, allow the Baby Bells to cut Internet service providers out of the DSL business. Forget the proposals to put the Bells on equal footing with the cable companies offering high speed connections. Forget Tauzin-Dingell.

According to a group of Internet analysts and business executives, the answer is failure. In a Tuesday letter to Federal Communications Commission (FCC) Chairman Michael Powell, the group urges the FCC to resist telephone company efforts tactics to “prop up businesses that technological progress has made obsolete.”

Just let the telecoms fail and “fail fast,” the letter urges.

The 44 signatories, led by independent telecommunications analyst David Isenberg, claim Internet-based technologies are subsuming the value embodied in the traditional telecommunications networks. According to the group, “This is causing the immediate obsolescence of the vertically integrated, circuit-based telephony industry of 126 years vintage. [Telephone company] bonds used to purchase now-obsolete infrastructure assets have become (or are inexorably becoming) bad debt.”

Calling the current telecom troubles “not a disaster, but a natural event,” the letter says a “revolution in productivity and human benefit as big as the agricultural and industrial revolution” could result.

“Too many business analysts are talking about bubbles and over-leveraged balance sheets as the root cause of current telecom troubles,” said Isenberg, commenting on the letter. “This confuses the symptoms with the disease. These things are just symptoms of the fact that Internet technology has made phone companies obsolete. If the government tries to treat the symptoms, the American economy will actually stay sick longer than if the natural process is allowed to run its course.”

The proper course, according to Isenberg, is to write down all circuit- based telephone assets to reflect their obsolete value, and re-capitalize the industry with as little government intervention as possible.

“People will continue to use the existing telephone network for years to come, just as people still rode in horse-drawn carriages for years after the automobile was invented. But the government never subsidized buggy whip makers, and it should not subsidize telcos now,” Isenberg said.

Isenberg told internetnews.com that the idea for the letter came after he attended an Oct. 7 FCC hearing on remedies for a telecom recovery.

“The very notion of recovery was questionable to us,” he said. “The results of the new Internet technology on the old are there for all to see in the industry stock prices. We just want people to think clearly about how to move forward for the greatest public benefit.”

Included in the letter are four recommendations to the FCC:

Resist “at all costs” the telephone industry’s calls for bailouts. The policy should be one of “fast failure”;

Acknowledge that non-Internet communications equipment, while not yet extinct, is economically obsolete and forbear from actions that would artificially prolong its use;

Discourage attempts by incumbent telephone companies to thwart municipal, publicly-owned, and other communications initiatives that don’t fit the telephone company business model; and

Accelerate FCC exploration of innovative spectrum use and aggressively expand unlicensed spectrum allocation.