Let Telcos
Fail Fast
Letter to
Chairman Cites "Natural Process"
Washington, DC, October 21,
2002 - An influential group of Internet analysts and business executives
today urged the Federal Communications Commission (FCC) to let failing
telecom companies fail, and "fail fast." The 44 signatories,
led by independent telecommunications analyst David Isenberg, said in a
letter to FCC Chairman Michael Powell that 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."
The group urges the FCC to resist telephone company pressure tactics to
prop up businesses that technological progress has made obsolete, in
order that advances in newer, better forms of communication not be
stifled. 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."
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