TCS Daily


It's Time, Time, Time for Broadband

By Duane D. Freese - December 3, 2001 12:00 AM

Time, time, time: thats what broadband - those high-speed connections to the Internet - is all about. And for one simple reason: time is money. Broadband will enable merchants to reach customers more easily; millions more workers to perform their jobs at home (thus lessening the waste of time from commuting); give people more educational and entertainment options; maybe even allow doctors to make a different kind of house call.

All of this transformation, though, depends on people and businesses having access to affordable broadband. And thats why Tech Central Station this week is launching a new section devoted exclusively to broadband. Since time is of the essence, this page will bring you the most timely and important news stories related to broadband, updated daily, along with commentary and vital reports on broadband issues. You also can access updated briefings about broadband access in your state and the positions of your representatives on federal communications issues.

This section debuts at a particularly important time as broadband deployment is facing pains. Phone companies have curtailed their expansion plans for digital subscriber line service (DSL) - telephone broadband. Last week, cable companies - who provide two thirds of the 12 million broadband connections nationwide - confronted a major crisis of their own.

Out of Time: Last Friday, Federal District Judge Thomas Carlisle ruled in the Excite@Home bankruptcy case that Excite could block use of its services to cable companies unless they renegotiated contracts. This ruling came despite pleas by Federal Communications Commission Chairman Michael Powell that the effect of such action would significantly damage roll out of broadband. In comments to reporters prior to the ruling, Powell lamented: ``We`re trying to get broadband out there. Talk about two steps forward and one really big step backwards. In one fell swoop, you could have a real big setback, which I think would be just terribly unfortunate.``

Powell opined that this wouldnt happen if he had the same power over cable to keep services running as he does over phone companies. The problem is that the Excite@Home cable Internet Service Provider - which provides e-mail, web page and Internet content services to 3.7 million in the United States - was losing $6 million a week under existing contracts.

For his part, Carlisle expressed confidence that the contracts - which pay Excite@Home about $20 of the average $46 cable companies charge for the service -- could be worked out in time to avoid service disruptions. For some 800,000 customers who bought the service through AT&T Broadband, that didnt happen. It didnt matter that AT&T owns 38 percent of Excite@Homes shares - including 79 percent of its voting shares - or that it had offered back in September to buy Excite@Homes assets for $307 million. When negotiations on a contract broke down over the weekend, Excite@Home pulled the plug. AT&T now is scrambling to move those customers over to its alternative broadband network, which it hopes to accomplish within 10 days.

In the meantime, Excite@Home continues to negotiate with other cable companies for contracts that would reportedly pay it $50 a subscriber per month.

The big question is, though, what are consumers willing to pay for high-speed Internet connections? The answer, for most, is not $50 - not for services they get now. Indeed, according to a report by the Information Technology Association of America, only about 12 percent of those with old and slow dial-up Internet connections are willing to pay $40 for high speed, always on broadband service; a third are willing to pay $25. All of this suggests that the cable companies will have to experiment with different models to attract customers to their high-speed lines that let them make mon ey. And regulators and legislators, rather than stepping in, need to take a step back for a moment to survey the broadband landscape rather than impose new regulations or change old ones. That, at least is what a National Research Council report issued last week suggests.

Just In Time: The report, Bringing Home the Bits, looks at the problems of getting high-speed broadband lines over the last mile into homes and businesses. It points out that broadband is available to more than half of all U.S. households - including 66 percent of homes passed by cable and 45 percent passed by phones.

But the report also notes that there is the sense in some quarters that something is broken with respect to broadband rollout, including worries that it isnt happening fast enough, with enough reliability, or protection for consumers in case of business failures. Smartly, the report warns: todays frustrations do not necessarily justify heavy handed intervention. It says broadband deployment will not occur overnight, but will depend, in large part, upon building up a critical mass of users and the development of new applications that attract more people.

Government at all levels can do some things to encourage deployment. It can subsidize deployment, in a neutral way, to rural or low-income areas where deployment otherwise may not occur. And it can make it easier for new entrants to gain rights of way. The report also says government needs to encourage facilities-based competition over the unbundling and resale or leasing of services as the best means to provide broadband services. Considering the conflict of interest inherent in mandated unbundling and releasing arrangements, that makes perfect sense. Ultimately, competition, not regulation, should rule the market for broadband. The question is how to get there. And thats where government needs to show patience, too, especially when confronted by demands for change in existing rules.

Bad Timing: Tauzin-Dingell: One unneeded rule change is the so-called Tauzin-Dingell Bill that may be voted on this week in the House. Those favoring it cite the NRC reports preference for facilities-based competition over unbundling as supporting that bill.

But the bill would essentially gut the Telecommunications Act of 1996 by letting the Bells into data long distance services without first opening up the last mile of copper phone lines they monopolize to competitors, so-called competitive local exchange carriers (CLECs).

Forget for a minute that the Bells agreed to the unbundling requirements during the acts negotiation, and only balked when regulators gave the requirements some teeth. The NRC report provides no basis to change the rules now. In fact, it explicitly says that changing present policy would severely disrupt the business plans of todays CLEC industry. Thus, it is reasonable to maintain unbundling rules for the present copper plant.

Only when looking to the future - to investment in new facilities - is there a real need for reconsideration of unbundling. And it suggests that unbundling rules should be relaxed only where the incumbent [i.e. the Bell operating company] makes significant investment to extend service to areas not served by existing infrastructure or to facilities constructed to enable new capabilities.

The fact is, in that regard, existing law already grants the FCC power to ease restrictions where those circumstances are fully met. Tauzin-Dingell writes a blank check that rather than leading to facilities-based competition would undercut it. As Adam Guglielmo, a DSL analyst for Telechoice Inc., wrote recently, Over the past few months weve seen the huge effort [the Bells] put behind trying to put the nail in the coffin of [long distance companies] with the Tauzin-Dingell bill, while at the same time their broadband businesses stumbled in the wake of ill-advised price hikes. Their focus needs to change if they want to win in the residential market.

Amen. The 1996 Telecom Act may require reform, but not a haphazard readjustment that favors monopolists - the Bells - at the expense of those who competitively built the backbone for broadband networks. Its time, time, time to pull the plug on that legislative nonsense.
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