AT&T, COVAD URGE CERTAINTY ON BROADBAND, LOCAL COMPETITION POLICIES
SAN JOSE -- Telecom industry urgently requires resolution of policy uncertainties on broadband and local competition to remove major obstacle to revived investment, CEOs told business conference here Fri. AT&T’s David Dorman and Covad’s Charles Hoffman spoke separately to Bay Area Council, business public policy group.
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
“We've got many questions and not many answers on how this is going to be resolved,” Dorman said of FCC and state local market policies. He said shrillness of debate had reached all-time high. “I'm sure we [Bells and long- distance] could all raise our EBITDA [operating cash flow] 2% if we just stopped lobbying and arguing. Hint, hint.”
On ground, though, cutoff of investment capital to local competition -- because of regulatory uncertainty and CLEC washouts -- has made competitive terrain friendly to AT&T’s renewed foray into local, Dorman said. Splitting U.S. telecom into local and long distance was “economically difficult to justify,” was anomalous, contrasted with other nations, and continues to make industry rationalization difficult, he said.
Covad’s Hoffman said FCC had created concern it would impede broadband development through policy shifts, but said he had been reassured Commission “wants robust competition.” He predicted Solomonic outcome to FCC’s triennial Telecom Act review this winter, in which Bells would “trumpet victory” over some relief from requirements to avail competitors of their networks but long distance carriers would be permitted to do more service bundling while being encouraged to build their own local facilities, and line-sharing would be preserved.
Dorman said Wall St. was having conflicting affects on AT&T, but stock market valued it and other long-haul carriers much lower than Bells. “It clearly values a monopoly model over a competitive model,” he said. AT&T’s strong balance sheet and cash flow “translate in the market [only] to a BBB rating,” he said, but “I'm very happy to have it because all my major competitors are BBB-minus or junk.”
Dorman indicated WorldCom’s enormous financial fraud was at least as much cause of telecom bubble as effect. Competitors such as AT&T made operational decisions during boom measuring themselves against reported WorldCom metrics such as 39% EBITDA margins, he said. Recent WorldCom filings show 13%. “That’s a striking difference,” Dorman said.