Analysts: Broadband Competition a 'Firestorm'

In an analysis released Thursday criticizing the U.S. Federal Communications Commission, market research company Gartner Dataquest (NYSE: IT) said a "radical reform" of telecom policy is needed if the rollout of high-speed Internet services, or broadband, is ever to break out of the slow lane.

"The insistence of some regulators, such as the U.S. Federal Communications Commission, to define every nuance of what an operator should and should not do has been the bane of the telecom industry," Ron Cowles, principal analyst for Gartner's telecommunications and networking group, wrote in the report.

'Contentious and Litigious'

The report recommended that regulators take a broader approach to guiding the industry, adding that they must find the right balance between "incentives, requirements, competition and monopolies," then sit back and let the market do the rest.

"Rather than trying to micromanage every little aspect of regulation, the regulators should be setting the principles of operation and then allowing the industry to negotiate bilateral and multilateral interconnection agreements and settlements," the report stated.

It also noted that regulators' failure to follow this path has resulted in an "increasingly contentious and litigious" telecom environment.

Strong Shall Inherit

The research company has criticized telecommunications regulators before, both in the United States and elsewhere. Gartner spokesperson Christy Pettey told the E-Commerce Times that the present analysis grew out of previous surveys and reports Gartner has conducted.

According to Gartner's analysis, small companies were given false hope that they could compete in a market that requires vast reserves of capital.

"The emphasis on having many competitors rather than strong competition has been the root of the problem in many countries, particularly in the United States and in the European Union," said Gartner research director Jean-Claude Delcroix.

"Many small players who were encouraged by national telecom regulators to launch into a highly capital-intensive service environment simply could not counter the market presence of strong incumbent players," Delcroix added.

Baby Bells Complain

Some industry observers seem to believe high-speed Internet access can save the struggling high-tech sector and spur growth of the presently sluggish economy.

Broadband issues are the subject of intense lobbing in Washington, D.C., with legislators introducing competing bills intended to spur broadband deployment. President George W. Bush also has called for faster growth.

At the heart of the issue is competition between the four so-called "Baby Bells," or local phone companies, and the cable companies.

The Baby Bells have long complained that cable, satellite and wireless broadband providers do not face the same regulatory hurdles as sellers of digital subscriber line (DSL) and other telephone-based broadband delivery services.

In order to better compete against cable, the local phone companies say, they need a level regulatory playing field. Currently, cable television companies control about 68 percent of the broadband market.

'A Firestorm'

The dueling bills are the latest salvo in a war that has dragged on for years in the United States' lucrative but slow-to-roll-out broadband industry.

"There's a firestorm going on out there," Cowles told the E-Commerce Times. "Everybody, regardless of the future potential for profits or meeting customer requirements, is hell-bent on hanging on to what they've got."