FCC ruling hurts U.S. telcos

Telcos have been gaining video customers lately, with an increasing number of them coming at the expense of cable TV companies. Meanwhile, the cable guys have been effective stealing voice customers from telcos. Heading into the second half of this year, you can likely expect both sectors to toughen up on their efforts to retain what they have been losing.

However, a ruling that occurred late last Friday at the Federal Communications Commission may ensure that telcos have a more difficult retention challenge ahead of them than do the cable TV firms. The FCC ruled that Verizon Communications, which had been accused by cable TV companies of unfair competitive practices, is not allowed to use information about its customers who were in the process of switching to cable voice in order to woo them back to Verizon before they make the switch. Comcast, Time Warner Cable and Brighthouse Networks said Verizon had been doing just that.

The regulations leave not only Verizon, but all telcos offering cable-like TV or IPTV in a tough spot because such information privacy rules have not traditionally been applied to the cable TV video business. For now, there appears to be a double-standard at work that favors the traditional cable TV players. Regulators should not just bend to the whim of a powerful telco like Verizon--they have already done that far too often--but neither can they responsibly allow one set of competitive marketing standards to be applied to one side of the telecom industry and not the other. The eventual ripple effect of this ruling could be felt in even the smallest markets, where an independent telco's chief rival for all services might not be another telco, but Comcast.

Telcos may have just been getting used to the Wild West mode of competitive behavior that has characterized the cable TV industry for years. Now, they need to watch their backs while having their ammunition rationed. --Dan

For more:
- read this report at The Wall Street Journal