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November 1, 2002
CONTACT: David Fish
(202) 289-8928

Prune the Telecom Deadwood
And Start With Worldcom, Eisenach Says in New Op-Ed

WASHINGTON, D.C. - The Clinton administration planted the seeds of the recent telecom meltdown with FCC chairman Reed Hundt’s policy of subsidizing the creation of too many competitors. Now it is the job of the Bush administration to clean up the resulting deadwood, says PFF President Jeff Eisenach in an op-ed published in today’s Washington Times.

Drawing an analogy to forest management, Eisenach says, “The policy choice is whether to prune the deadwood or prop it up. And whether you’re talking about dead telecom companies or dead trees, the right answer is the same: For the sake of the forest, the deadwood has to go. The place to start pruning is with Worldcom.”

Eisenach also noted that FCC Chairman Michael Powell’s focus on saving Worldcom seems inconsistent with his broader views on competition. While Powell has criticized what he calls the Clinton Administration’s “pro-competitor industrial policy” for “promising that all competitors could be salvaged and sustained in the name of competition,” the FCC Chair has said that with respect to Worldcom he is “focused on what policy can do and regulatory authorities can do to ensure the economic viability of competitors.”

“Which Michael Powell is running the FCC,” Eisenach asks in the op-ed, “the one who would prune the deadwood or the one who wants to prop it up?”

While the decision of whether Worldcom will reorganize through Chapter 11 or be forced to liquidate is made in the federal court, Eisenach says the FCC and other government entities have a say on other relevant points. “In resolving all this, Mr. Powell ought to heed some advice offered to Mr. Hundt, who candidly reports on page 179 of his book he was advised by FCC economists in 1996 that his policies might ‘bring the Dow crashing down, shake consumer confidence, and even threaten the president’s reelection’,” That advice, Eisenach writes, “was true then, and it’s still true today.”

The Progress & Freedom Foundation is a market-oriented think tank that studies the digital revolution and its implications for public policy. It is a 501(c)(3) research & educational organization.



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