July/August 2001

BY RALPH HAYON

As a country, we continue to face crises. Fortunately, life-threatening crises such as the one portrayed in Thirteen Days have been few and far between (a very good thing). But we face other crises as a country, some regional, and some national. Our friends in California, for example, are dealing with some very real and serious energy issues.

TELECOM: COMPLEX ISSUES
The energy industry, unfortunately, is not the only one in crisis. Telecommunications is hitting some pretty hard times. Over the past several months, we have seen the bankruptcy filings of some very "reputable" brands that have developed over the past few years -- NorthPoint, Teligent, Winstar, ICG, Broadband Office, and now PSINet. My guess is that there are more to follow. A big mop is needed.

Putting the flops to the side (which many have attributed to poor management), one asks -- how did all of this start in the first place? The answer is clear -- the growth and investments in telecom are rooted and fostered by the 1996 Telecommunications Act, an Act designed to promote telecommunications competition, deliver new services, and lower communication costs for the public. This Act of Congress had very good intentions and encouraged a non-governmental and independent investment climate never before seen in our country. It is believed by some that close to $1 trillion was committed by investors in the telecom sector based on this single Act of Congress.

Unfortunately, it created a crazy type of investment environment. Rather than creating an environment that promoted investment in needed public telecom utilities like local broadband (fiber to the curb), it enabled an over-investment in areas such as national fiber deployment and redundant carrier facilities (which are now being sold off at 10 cents on the dollar). Suddenly, venture capitalists were deciding which programs should get funded (as well as which should not), and later-stage investors became venture capitalists whose investments were made with literally no collateral to stand behind issued bonds. It is estimated by some that investors have lost close to $650 billion in these telecom investments.

WE CAN MAKE THINGS BETTER
Can things get worse than this? It seems like they can. While the stock market has been going though its gyrations and finally appears to be showing some signs of stabilization, a subcommittee within the U.S. Congress, Energy and Commerce, has initiated and approved legislation in the form of HR 1542 (which was being submitted to the full House of Representatives at press time). This bill, which has the title "Internet Freedom and Broadband Deployment Act of 2001," is not a good bill for the broadband public. On the surface, it sounds like a very promising Act. But once one digs into it, it becomes clear very quickly that this bill will significantly limit competition in the local markets for broadband, will create an environment of restricted broadband capabilities, and will put into jeopardy the deployment of exciting new services such as voice and video over IP.

UNIVERSAL BROADBAND
So what does this country need? Since I am a firm believer that you can never criticize something without proposing an alternative, I have a proposal. I believe what this country needs is a "Universal Broadband Act." Specifically, this is an Act that will create a funding mechanism to enable the construction of fiber to the curb for every business and home in America. This "fiber to the curb" will be owned by the public and should provide open access to all who want and desire access. The construction of this national local broadband highway would be funded by the issuance of U.S. government instruments that would be guaranteed and paid off over 30 years by a usage-based broadband tax. What I propose is similar to the 1956 Federal Highway Act signed by President Eisenhower that created a funding mechanism for our roadway system, and which was paid off via a gasoline tax.

Our investment community needs focus and assurances that the investments they make are not wasted and ultimately contribute to the development of a true and needed infrastructure. A properly constructed and insightful "Universal Broadband Act" can provide a funding mechanism that creates a secure investment environment -- assuring the United States a local, high-capacity broadband infrastructure that provides economic and competitive advantages unparalleled by any other country in the world. This proposed Act would help the U.S. maintain the technical world leadership it has obtained.

The public has been notified. I'm interested in your thoughts.

Ralph Hayon is president and CEO of congruency, Inc., a VoIP infrastructure platform and services provider to broadband data carriers for end-to-end IP telecommunications. He can be reached at [email protected].

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