Carrier Evolution

One important element in any nation’s communications landscape is the degree to which competitors are able to use facilities-based competition. The ability to control one’s own network, when such networks are scarce, obviously is an advantage.

Cable TV operators, for example, traditionally have resisted any notion that they simply buy access from a third party to run their businesses. The thinking always has been that “you cannot build a successful business of this type using somebody else’s network.” That might not always be the case, but so far has been the rule.

As competitors have found in the U.S. market, for example, relying on “somebody else’s” network creates key business risk, especially if that access is subject to favorable rules put into place by regulators. What regulators give, they can take away.

You might argue that a big change in U.S. wholesale access pricing was the principal reason many competitors stopped basing their businesses on wholesale access. In fact, firms as large the former independent AT&T and MCI were hoping to use steep wholesale discounts to jumpstart their entry into the local access business.

Those efforts foundered when the rules changes, and significant discounts withered. In fact, most people do not recall that AT&T CEO Mike Armstrong bought Tele-Communications Inc., the largest U.S. cable operator, before later selling those assets to Comcast.

Though debt burdens and the cost of upgrading those assets proved to be the deal’s undoing, the strategy, in retrospect, arguably was the correct one: AT&T needed a facilities-based way of competing in the local access business, to remain viable. Afterwards, AT&T “merged” with SBC Corp., and ceased to be an independent company.

Now there is new hope that unlicensed “white spaces” will provide an avenue for competitors to compete on a “facilities-based” basis in at least some markets. Though it isn’t clear whether the effort will prove successful, there is a key reason strategists think access to “facilities,” even if non-licensed and shared, will be important.

It has proven to be crucial in the local access business, in the past.