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May 2002

The Regulatory State Of Broadband


The revitalization of the country�s technology sector is vital to American economic recovery. Information technology drove the boom of the �90s, and its renewed growth can fuel recovery in 2002. Broadband, the next generation of Internet service, offers a creative foundation on which a host of multimedia applications can be developed.

Many view the widespread deployment of broadband technology as a key component to that recovery. Recent debates in Congress on the Tauzin-Dingell Bill and new FCC initiatives indicate that the government is also looking to broadband to boost the country�s economy.

Despite a great deal of hype, consumer uptake of DSL to date has been disappointing due to many factors outside of their control. Analysts attribute this dismal uptake to a variety of factors including technological and regulatory.

The intent of the Telecommunications Act of 1996 was to increase the number of players by opening up the local loop to competition. One of the ideas was to level the playing field for broadband data services by allowing newcomers like competitive/data local exchange carriers (CLECs/DLECs) to share access lines from the incumbent local exchange carriers (ILECs) and use them to provide broadband data service such as DSL. Granting access to the network was the first step. Gaining access is another story.

The ILECs and CLECs have been drawn into battle on the unbundling issue. DSL technology enables carriers to transmit high-speed data to customers over the same standard telephone lines used to carry voice. Data is transported using high-frequency modulation, while voice is carried as low frequency signal. A splitter, which separates the data from the voice, is required to give competitors access to the data portion of the local loop. Typically, splitters are located in digital subscriber line access multiplexers (DSLAMs), installed by the competitive carrier to provide DSL service. They are collocated with the ILEC�s switching equipment. When a subscriber changes his data service provider, porting from one splitter to the new provider�s splitter can disrupt a customer�s voice service provided by the ILEC.

ILECs argue that sharing line with broadband data service providers presents significant challenges and could result in compromising the quality of �life-line� voice service to their subscribers. Line sharing also diminishes the control ILECs have on the subscriber loops and makes loop management and testing much more difficult compromising the quality of customer service.

Digital loop carriers (DLCs), deployed by ILECs to take fiber closer to the curb, have also created roadblocks to deploying the DSL. The DLC, also called a remote terminal, aggregates lines from neighborhoods, residential areas, and small/medium businesses. It is connected to the CO with fiber or T1 lines. Most DLCs deployed today are narrowband and cannot support high-bandwidth data service. These DLCs must be upgraded to become DSL-capable. ILECs are not anxious to incur the expense of upgrading their networks until regulatory uncertainties are cleared.

From the CLEC�s perspective, it is not economically feasible to deploy DSL service without line sharing. Duplicating the incumbents� DSL access lines is such an expensive proposition that it is not a viable solution. Collocating DSL termination at the DLC is not a workable option either. With the downturn in the economy, investment funds for competitive players have dried up. Many of the start-ups that hoped to take market share from the ILECs have filed for bankruptcy. The remaining providers simply do not have the funds to invest in purchasing equipment or building networks.

The Tauzin-Dingell Bill, which recently passed the House by a vote of 273 to 157, revisits the way in which high-speed Internet is regulated and attempts to break this stalemate. The bill has pro-incumbent bent and would allow the ILECs to provide broadband service without meeting 1996 Telecommunications Act prerequisite of opening their networks to competition. If the bill is approved, ILECs will no longer be required to unbundle the high-frequency DSL portion of the access loop. Opponents of the bill argue that it would kill off competitors who rely on access to the ILECs network to reach their customers.

As a further measure to spur the deployment of broadband, the bill requires the incumbents to roll out high-speed service on a specific schedule to guarantee broadband coverage across all regions. It calls for the availability of broadband at 30 percent of central offices in the first year, 40 percent within two years, 70 percent in three years, and 100 percent in five years. The bill has to pass the Senate before becoming the law.

Past rulings issued by FCC clearly stated the Commission�s position on broadband � ILECs must share their lines with competitors and unbundle the high-frequency DSL component of the local loop. However, recent initiatives suggest that the FCC may be reconsidering its stance.

The FCC wants to resolve the outstanding regulatory issues that relate to the delivery of broadband Internet access services over traditional telephony-based circuits. The FCC recently launched several proceedings to solicit input from the industry. It has stated that one of its objectives is to ensure that broadband services exist in a minimally regulated environment that promotes investment and innovation. Additionally, the FCC is questioning whether ILECs providing DSL should be considered monopolies given the competition they face from cable and wireless broadband providers. This seems to indicate that the Commission may relax its current unbundling regulations. Interestingly, the FCC has tentatively concluded that wireline broadband Internet access services are information services, with a telecommunications component, rather than telecommunications services with an information component. If the Commission determines that broadband is in fact an information service, then many of the telecommunication regulatory requirements will not apply to the technology.

The recent regulatory initiatives will have significant impact on the future of telecommunications. If the current requirements to share lines are relaxed, it is likely that the ILECs will become more aggressive in their deployment of DSL service, increasing their investment in broadband infrastructure and services. However, DSL may well be relegated to a data-only service. Since the ILECs already provide voice service, there is no strong incentive for them to deploy voice over broadband in the near term.

The independent DSL providers will be the big losers. If they are required to duplicate access lines to the customer premise, they simply will not be able to compete.

The consumers will benefit however the stalemate is broken. With enforceable unbundling, they will have access to service delivered by a variety of providers. If the ILECs are not required to unbundle the local loop, they will likely upgrade their networks and make DSL available to many more consumers.

Mr. Ravi Ravishankar is director, Advanced Technology Planning, Tekelec. His focus is on defining signaling solutions and products for the next-generation packet telephony and 3G wireless networks. Tekelec is a leading developer of telecommunications signaling infrastructure, softswitches, testing and diagnostic solutions, and service applications. Please visit their Web site at www.tekelec.com.

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