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Points Of Presence

Editorial Director, Communications ASP

[August 24, 2001]

Broadband Deregulation, In The Name Of Choice

It's been a while since I discussed the implications of H.R. 1542, the Internet Freedom and Broadband Deployment Act -- otherwise known as the Tauzin-Dingell Bill -- which is currently making its way through the House of Representatives. The last time I wrote about the bill I approached it from a voice-over-IP perspective, and got a fair amount of response and criticism. The bill is vague in explaining its impact on voice-over-data communications, so I'm going to avoid that topic altogether this time around. But even without discussing its possible effects on VoIP, H.R. 1542 has the potential to change the entire telecommunications and broadband markets. The House is on recess and this bill hasn't been making the headlines it did earlier in the summer, but it still deserves discussion: it has been placed on the House's public calendar, and will be scheduled for a floor vote soon.

I was shocked to learn recently that my coworker, who lives in a metropolitan area in Connecticut with a population approaching 75,000, cannot get broadband access to his home. It's simply not available. His cable company, Comcast, says the service "might be available soon." And his local phone company, SNET, (which is actually owned by Regional Bell Operating Company (RBOC) SBC Communications), also says it's not available for his area yet, but is "on the way." Those are his only two options for broadband, so right now, he has zero options (and he also can't get a cell phone signal at his home, just to add insult to injury).

The Tauzin-Dingell Bill is supposed to ensure better access to broadband services by easing regulations placed on the RBOCs by the Communications Act of 1934, and subsequently the Telecommunications Act of 1996. The lifted restrictions would allow the RBOCs to offer high-speed data services outside of their local markets without first opening up their local voice service areas to competition, a current requirement. It would also prevent the FCC from requiring the RBOCs to offer unbundled access to the network elements used for provisioning high-speed data service, as well as from requiring them to offer high-speed data services at resale or wholesale rates.

This tells me two things. First, if the bill passes, the Bells would be able to offer high-speed services outside their local calling areas -- all in the name of giving customers greater access to broadband services, as well as choice. The Bells would also be able to compete with the cable companies, who currently aren't regulated in offering high-speed services, which is the major argument for passage of the Bill. But I find it hard to believe the Bells will be gung ho in offering services in competitive markets, when most are not rushing to roll them out on their home turf. And the choice customers will get, in the long run, will be Bell, Bell, or cable company -- with maybe a few strong service providers thrown into the mix. Which leads me to my second point. If the bill passes, CLECs and ISPs will take a major hit. Not that they haven't already, and as some readers pointed out after my last column on this topic. Why should poorly managed and over-funded competitors be given special privileges? They shouldn't. But this Bill takes away the incentive for RBOCs to open up their local service areas to competition, while also preventing service providers from gaining access to the Bells' networks at reasonable prices. I believe that could sound the death knell for many a struggling CLEC and service provider, ultimately taking away the consumer choices that this Bill purportedly encourages.

As it is, competitive broadband service providers have a difficult time gaining access to the Bells' networks. My friend Ken Melms, who lives just outside New Haven, CT, has been using Rhythms NetConnections for his DSL access. I remember how frustrated he was waiting to get connected, which took several months because Rhythms had to first gain access to SNET's central office. Rhythms filed for Chapter 11 bankruptcy earlier this month, and will shut down its services nationwide as of September 10. Fortunately, Ken got a phone call and a letter from Choice One Communications, an integrated communications provider (ICP) that will provide him with the same level of DSL service, as well as local phone service at a price competitive to SNET. Of course, he explored other options, and there are several service providers in his area that claim they can offer him DSL. But he chose Choice One because their equipment is already collocated in SNET's CO, and because they could offer him phone service as well.

"It's attractive because I dislike SNET," said Ken. "My options aren't severely limited, seeing as my area has a CO located not a quarter of a mile from me. Any DSL backbone with a box in the CO will be able to handle my service. I've looked around and quite a few say that they're in my service area, but we all know that means that they will gladly sign me up and put my install on hold while they figure out how to get a box in there." If H.R. 1542 passes into law, companies like Choice One won't have a chance to offer competitive local phone services in closed markets. Not to mention that the bill will make it even more difficult for them to get their broadband equipment collocated.

A recent Washington Post article said RBOC lobbyists have spent about $3 million collectively in a media campaign to support the legislation, while lobbyists for the competitive service providers have spent about the same amount in opposition. I find these figures truly amazing (and I understand that $6 million is a drop in the bucket compared to the costs associated with rolling out DSL -- but even so it's a huge amount of money) considering the poor financial state of most of the service providers, as well as the gripes of the RBOCs that slow service rollouts in their local areas have been caused by economic conditions.

So, just what are the facts on broadband services in the US? The FCC issued a report earlier this month summarizing the data on high-speed Internet services based on surveys of qualified providers from 2000. The data shows that the number of connections increased by 63 percent during the second half of 2000, reaching a total of 7.1 million high-speed lines in service. Of those lines, 5.2 million were residential and small business subscribers, and subscribers were reported in all 50 states, as well as DC, Puerto Rico, and the Virgin Islands, They were also reported in 75 percent of U.S. ZIP Codes. ADSL lines increased by 108 percent during the second half of 2000 for a total of two million connections, while high-speed cable connections increased by 57 percent, to reach 3.6 million connections. The number of satellite and fixed wireless high-speed connections also increased from 50,000 in 1999 to 112,000 in 2000. High-speed subscribers were present in 96 percent of ZIP codes ranked in the top one-tenth by median family income, while they were present in only 56 percent of the bottom one-tenth of ZIP codes ranked by the same criteria.

My coworker who can't get access to broadband believes his area may have been overlooked for service because it's not in the top tier for family income. This is certainly a possibility, although the phone and cable companies argue that they are working as quickly as they can to build out their broadband infrastructures. Maybe so. But it seems to me that some service provider competition could certainly help to speed things along. H.R. 1542 won't ensure that consumers can choose among competing ISPs, as stated in the Purposes section of the bill. It will instead reduce consumer choices for broadband services, giving more power to the RBOCs -- which have already been sluggish in getting these services to market.

Laura Guevin welcomes your comments at lguevin@tmcnet.com.

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