December 02, 2000

The election of George W. Bush as 43rd president of the United States should bring a more hands-off approach on business, meaning less regulation for the telecommunications industry, according to Dataquest Inc., a unit of Gartner Group, Inc. Gartner Dataquest analysts said some of the expansion of the telecommunications industry has been held back by the government's micromanagement of the industry and reluctance to encourage free-market dynamics.

"The telecom economy is hell-bent for growth, and nothing short of a major disaster is expected to stop its surge and insatiable consumption of bandwidth," said Alex Winogradoff, vice president and chief analyst for Gartner Dataquest's worldwide telecommunications group. "This new telecom economy brings significant uncertainty for the industry. This uncertainty clearly requires government oversight but less government interference - more regulatory freedom and less industry/social engineering.

If campaign rhetoric can be believed, a Bush administration will be more progressive and less restrictive on how this market develops than the previous administration. For example, expect the 271 approval process to be less laborious and contentious with more than ten states receiving approval from a Bush FCC compared to one or two per year under the Clinton Administration. "

There has been much scrutiny over the effectiveness of the Federal Communications Commission (FCC). Under the Clinton/Gore administration, the FCC has been a rulemaking body trying to micromanage the implementation of the 1996 Telecommunications Act. The commission did so by defining the rates, terms and conditions of interconnection between the incumbent local exchange carriers (ILECs) and their nascent competitors rather than imposing broad guidelines from which to follow. Gartner Dataquest analysts said the result has been a continuum of lawsuits and a stall-out of the process. This commission will have the opportunity to set new policies when the Bush administration appoints a new chairman of the FCC.

"Each time the FCC has attempted to seize state regulatory authority or to dabble in local exchange offerings, the result has been the same: a failed policy that has held back the development of the telecom industry and has engendered a contentious, polarized market," said Ron Cowles, principal analyst for Gartner Dataquest's worldwide telecommunications group. "A Bush presidency is not likely to repeat the sins of the past, giving more weight to states rights in regulation and trusting market factors to stimulate the industry."

The Bush administration will appoint its own attorney general and is expected to adopt a more business-friendly strategy. The significant impact of the Bush administration on telecom and telecom-related businesses will be a less proactive Justice Department. Gartner Dataquest analysts point out that the Microsoft investigation for instance would take on a more reasoned resolution under the Bush administration.

"This less-obtrusive posture will change the policies followed by the FCC and the United States Trade Representative (USTR), which will lead to better relationships internationally and with the World Trade Organization," said David Rendall, group vice president for Gartner Services. "Expect fewer appeals of court rulings by the FCC; expect less governance of mergers and acquisitions by the DOJ and the FCC; expect more handling of customer complaints by the FCC; and expect more activities designed to advance networks in the United States, such as freeing up 3G spectrum and deregulation of advanced services."

Gartner Dataquest analysts said it is time to effectively decouple regulated services from local dial tone. It asserts that the appropriate measure is to frame the future as a competitive expanding information service economy and then define the public policy constructs to get there. This future world, which Gartner Dataquest calls the "infocosm," is a connected world of people that has access to an increasing array of services and devices for individuals and businesses.

"Many of the successes of the future will be the result of private/public partnerships established to meet the infocosm needs of a community," Mr. Cowles said. "The incentives offered by such a relationship, including such things as investment tax credits and access to rights-of-way, can be made available through enabling legislation that will act as the stimuli. We believe that a Bush administration would be supportive of such a policy initiative, would permit it to disengage itself from the failed policies of the past administration and help it to build a proactive and socially attractive regulatory legacy."

For more information at http://www.gartner.com.

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