Telecom Analysts Call for Light Regulation

Legislation in the works would attempt to update the 1996 Telecommunications Act, addressing such questions as the telcos' rights in entering the video market and "net neutrality."

Investment analysts who were called to Capitol Hill to testify on the telecommunications market lent their support to the incumbent telephone companies lobbying agenda for reduced regulation.

The chairman of the Senate Committee on Commerce, Science and Transportation, Sen. Ted Stevens of Alaska, said that he plans to introduce a bill on telecom reform toward the end of April.

The legislation will attempt to update the 1996 Telecommunications Act, addressing such questions as the telcos rights in entering the video market and "net neutrality."

At a hearing March 14, Stevens asked four financial analysts what Congress can do to encourage investment in the telecom sector.

Kevin Moore, analyst and managing director at Wachovia Securities, said that lawmakers should minimize the investment communitys need to constantly reevaluate the regulatory environment by introducing minimal and flexible regulation.

"We want regulatory stability and certainty," Moore said, adding that the bill should not be overly application-specific. "The key thing for regulators is to do no harm."

Much of the congressional debate on telecom reform will focus on "net neutrality," which Craig Moffett, vice president and senior analyst at U.S. Cable and Satellite, Broadcasting, noted has become a catch-all term for numerous competing agendas.

Consumer advocates and large online content providers, such as Google, Yahoo and, are urging lawmakers to stop the Regional Bell Operating Companies from charging extra for premium delivery, fearing that such a tiered pricing system would empower the carriers to block content.

The Bells argue that the large content providers use a large portion of bandwidth and therefore should help pay for the cost of network upgrades.

Stevens asked for Wall Streets perspective on whether the network operators could get away with blocking access to sites such as Googles or Yahoos.

"I think that would be very difficult to sustain," said Luke Szymczak, vice president at JP Morgan Asset Management. "It would always allow an opportunity to the fellow not blocking it to take customers."

In general, the analysts backed up the Bells stance on net neutrality.

/zimages/2/28571.gifClick here to read more insight about net neutrality.

Aryeh Bourkoff, managing director at UBS Investment Research, said that the carriers should provide equal access to content at a defined capacity level, and above that level implement a tiered pricing structure.

Cautioning that strict rules on net neutrality could dampen the return on the telcos network investments, Moffett said that preventing carriers from prioritizing traffic for a fee could have the unintended consequence of leaving consumers to foot the bill.

Wall Streets perspective on telecom regulation comes as no surprise on Capitol Hill, perhaps explaining, in part, why only two members of the committee, including Stevens, attended the hearing.

/zimages/2/28571.gifCheck out eWEEK.coms for the latest news, views and analysis of technologys impact on government and politics.