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Ben of Alcatel: Regulators Reducing Competition, Raising Prices

Under pressure from France Telecom, Deutsche Telekom, Telefonica and the ETNO gang. A First Look. CEO Ben Verwaayan of Alcatel told shareholders he believes European regulators are profoundly changing their priorities.He believes they will stop their efforts to reduce the cost of unbundling copper to the home and backhaul from smaller exchanges. This directly affects the costs of competitors and almost certainly consumer prices. In addition, he believes that the competitive rules on “next generation networks” – mostly fiber/DSL upgrades – will be modified.

This corresponds to how I read the contradictory statement below from EU Commissioner Neelie Kroes. Ben is glad, because he thinks the telcos will invest substantially more because they will be making more money through the higher prices and weaker competition. This may be true in the short run; the big telcos, starting with BT, have been holding off on deployments they need to make, partly as a means to put pressure on the regulator. But once that effect passes, both Kroes and Verwaayen are almost certainly wrong, based on the U.S. experience. Killing competitors has resulted in less fiber investment, as both Verizon and AT&T cut back their plans.

Increased income for telcos in the absence of strong competition is far more likely to go to shareholder dividends than to further investment. Investment is far more effectively induced by strong competition, which scares the carrier into a fear of going out of business if they don’t invest. Without that fear, carriers will use any available money for shareholders, not networks. This is especially true now that CEOs are being paid tens of millions in options and stock rights. That gives them enormous personal incentive to keep the stock price high and the public interest be damned. They’ll probably have moved on before the company feels the effects of underinvestment.

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Ban Kagame Slim Toure courtesy ITU

Hamadoun Touré is an Africanist

Ban Kagame Slim Toure courtesy ITUHamadoun Touré is an Africanist both in public concerns and personal life. He is deeply committed to improving social conditions in Africa. He’s steered many ITU programs to paying special attention to African needs, including the new Conformance and Interoperability initiative. African technologists such as Joshua Peprah of Ghana often are recognized by ITU awards. He’s ahead of most of us; Africa in a few years will have more Internet users than Europe. There are 360M mobiles among Africa’s billion people, expanding at 15%/year. In the next few years most will upgrade and have an net connection. It’s time to start thinking about about a net with more Africans than Americans.

       Touré presents himself in the dignified suit of the Western businessman but has not been subsumed by Euro-American culture. His friends tell me he’s maintained a fierce pride about his African origins. He became neither Russian while studying in the Soviet union nor French-Swiss after a decade in Geneva.  He was born in the desert city, Timbuktu, 1953 in the French colony Mali as a new era approached.  His father was a civil servant and he was an only child who grew up in comfort.

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Good Government Work

Real Cash for Rural Grant Matching (U.S.)

Congress requires recipients of the broadband stimulus and most rural grant programs to pay a percentage of the cost, providing an incentive to keep costs down. In practice, instead of cash most recipients claim credit for “donations in kind,” such as the space in the library used for a community computer center. Telcos often “contribute” fiber or routers they already own, built or bought for other purposes. That makes a mockery of the original intent, of course. 

   Ken Kochno at the Rural Utilities service has just changed the game. “The new rule maintains the current program’s 15 percent matching requirement but clarifies that the match must be in cash and can also be used to fund operations of the project. http://1.usa.gov/Y2dDtX” 

   On the other hand, the new rules don’t require disclosure of what the money is being spent on with specifics. RUS should follow the example of NTIA, putting on the web detailed reports on how the public money is being spent. Public disclosure makes it harder to spend $20,000 on a router for a small library with a single terminal. That actually happened on a project in West Virginia. Sunshine is good.