TCS Daily

Who Do You Trust? Bush or the Bells?

By Duane D. Freese - December 13, 2001 12:00 AM

Who Do You Trust? was great as a game show in the early 1960s, providing the liftoff for Johnny Carson to become host of the Tonight Show. But there were no fun and games in the stark choice House lawmakers faced on a complicated telecom bill that threatens the future of telecommunications competition and the new economy.

Who would they trust? The Bells? Or the Bush administration? In deciding to delay action on the so-called Tauzin-Dingell bill until next year, GOP leaders made a wise choice. They gave the administration time to come up with a plan rather than rush a vote on a bill favoring the Bell phone monopolies. In the process, real competition was given a reprieve from a telecom takeover by old-fashioned monopolists.

The Tauzin-Dingell bill is touted by the four remaining Bells (Verizon, SBC, Qwest and Bell South) as a means of spurring their investment into high-speed data links. Broadband, with its ability to download files at speeds hundreds of times faster than current dial up services, is considered by many economists as key to launching another round of productivity and economic growth. Free us of regulation, and we will get that job done, say the Bells.

Their track record for doing what theyve promised lawmakers and regulators, though, falls short of sparkling.

As detailed in Frank Kushnick's, "How the Bells Stole America's Digital Future," in 1986, Southwestern Bell, now SBC, in its annual report claimed that high-speed integrated service digital networks - ISDN - would become commercially available by 1988 and "revolutionize day-to-day communications." In 1991, Ameritech, now part of SBC did the same, arguing that high-speed lines would result "in higher productivity and lower on-line charges for consumers."

But what really happened? Nothing. The Bells used the promises to win approvals for mergers and release from rate of return regulation for their monopolies, but did nothing in return.

In 1992, for example, Bell Atlantic, predecessor of Verizon, promised to increase its infrastructure investment if only the state would give it greater flexibility on rates. Opportunity New Jersey worked well for Bell Atlantic, as BA-NJs return on equity jumped from 22 percent to 40 percent in the three years following enactment. But as for infrastructure investment, it dropped in real terms by $76 million in that same period and was $545 million less than promised, New Jerseys ratepayer advocate found.

Michigan today is suffering a similar insult as SBC Ameritechs Project Pronto has become Project Long Drawn Out Pause. To win its merger with Ameritech, SBC promised lawmakers and regulators at all levels that it would quickly roll out DSL -- digital subscriber lines, the key telephone broadband technology but cut back by half before the ink on its merger had dried.

The Bells have taken the same route in regards to the Internets expansion.

In 1996, when the Internet started to really begin taking off, the Bells filed reports with the FCC saying Internet traffic was overburdening their systems. They wanted per minute access charges placed upon Internet Service Providers to pay for infrastructure investment. In fact, as a Bellcore study showed, the Bells national cost of accommodating the increased demand amounted to about $245 million nationally. The Bells made billions more than that as people bought separate lines to connect to the Internet. Had regulators bought into their plan, though, the Bells complaints could have throttled the Internet in its crib.

The Bells also tried to rip off customers of competitors DSL services, even when the Bells themselves wouldnt provide the service. Until the FCC required line sharing, the Bells demanded $20 to $30 from customers of competitive DSL providers for second phone lines into the home if they didnt want an interruption of service. They claimed that it was the only way to deal with potential repair problems.

A rushed vote on Tauzin-Dingell would have ignored this history at the peril of the nations economy. Now, the Bush administration has time to find a better path for broadband deployment. Its on the move already.

This week, the FCC filed two notices of proposed rule makings dealing with local competition and broadband deployment. The aim: to find out whats needed to accomplish both ends.

And only last Friday, Commerce Department Assistant Secretary Nancy J. Victory told the Competition Policy Institute Conference: The administration is a believer that the opportunities and innovation offered by high-speed networks are crucial to promoting America`s productivity and our people`s welfare. The question is: what are the right policies to ensure broadband services develop and are made available in a manner that best benefits our country?

The administration has laid guideposts for achieving those ends, but hasnt reached firm conclusions, awaiting responses from all those with a stake in the outcome.

My overarching concern, Victory said, not just keeping telecom on track, but rather making sure that telecom is on the right track, heading the right way to deliver competition and consumer benefits. The rails upon which those tracks are built need to be laid on a firm factual bed with each individual rail connected to the others by carefully hammered policy spikes.

Congress needs the administration to craft a broadband policy that leads to competitive markets, and not lay down a rail like Tauzin-Dingell that could place the nation on the wrong track.

Tauzin-Dingell simply is not a well-thought out connection to a competitive broadband future. Tech Central Station has long pointed out that, as proposed to lawmakers, it guts the key incentive in the Telecommunications Act of 1996 for the Bells to open their loops to competition the provision of long distance service. By letting the Bells into the most lucrative part of that service data -- without opening up their systems first, and further limiting state and federal regulation of any of their broadband operations, Congress would soon find that instead of expanding broadband all theyd done was expand the Bell monopolies.

The answer to the question of who to trust is simple the Bush administration certainly deserves more credence than the Bells. Laying the foundation for competition requires dealing with restraints on all competitors, not just relaxing those that now keep monopolists from leveraging their power to extend their reach. Here-e-e-es Tauzin-Dingell amounted to late night political maneuvering; real telecom reform is a prime time concern.

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