TCS Daily


Cooperative Extension

By Duane D. Freese - February 26, 2003 12:00 AM

"Great discoveries and improvements," Alexander Graham Bell, the inventor of the telephone, once said, "invariably involve the cooperation of many minds. I may be given credit for having blazed the trail, but when I look at the subsequent developments, I feel the credit is due to others rather than to myself."

Last week, the Federal Communications Commission authored rulemakings on local telephone competition that looked anything but cooperative.

By one 3-2 vote, with Chairman Michael Powell vigorously dissenting, the commission gave states the authority to decide what parts of the regional Bell operating companies' networks would continue to be leased at discounted prices to rivals. Powell wanted to phase out the rules, in particular removing switches from the so-called unbundled network element platform, or UNE-P, that the Bells will continue to provision at state-determined wholesale rates.

And in an apparently shifting series of votes on high speed broadband issues, the commission ruled that the Bells wouldn't be required to unbundle fiber to the home, nor to fiber loops the Bells built out short of the home, nor, even, sharing of lines for competitors to provide digital subscriber lines. Powell agreed with the majority on the first to steps, but not the last.

Naturally, the response to these split decisions differed markedly by how the way one was affected.

Long-distance carriers, who must provide fair access to their own long-distance networks to the Bells, applauded the UNE-P decision, but deplored the line-sharing and fiber rules as unfair to them. Why should the Bells get access to their long distance fiber loops at fair prices if they can't do the same with the local loop?

Competitive Local Exchange Carriers to the Bells applauded UNE-P, too, but Internet Service Providers and DSL competitors, such as Covad, deplored the elimination of line sharing saying that it essentially entrenched the Bell residential monopoly in DSL service.

Finally, the Bells, deplored the UNE-P segment, which they said was so bad that they said they would have no money for investing in broadband. If they follow through on that, then they will have made a lie out of the favorite line they tried to sell in pushing The Broadband Freedom Act last year: "new wires, new rules." Next they'll say, "Make all wires our wires and we'll consider broadband investment."

The best face that can be put on all this is that everybody is engaged in a little posturing for future battles in both courts and in the Congress.

The basic point, though, is that competition in local service has life. The FCC did not snuff it out, as it could have by precipitously changing the rules for competitors gaining access to the local loop.

But until the competitors to the Bells build up a sufficient volume of customers to warrant building their own facilities - in particular switching and fiber into neighborhoods - their life will be tenuous.

The reason Powell was simply wrongheaded on UNE-P - and why states should determine when elements are lifted - is that no one can build out a system until it has a customer base. That's what happened in the long distance arena when Sprint and MCI, later WorldCom, got their footing using AT&T's network under judicially mandated rate controls. That's what has to happen in local if there is to be competition.

The complaint by Chairman Billy Tauzin, R-La., of the House Commerce Committee that somehow FCC Commissioner Kevin Martin, a Bush appointee, was a "renegade Republican" for siding with the two Democratic commissioners on the UNE-P vote was silly. States' rights and competitive markets are Democratic ideals? Monopoly is a Republican one? Teddy Roosevelt would turn over in his grave.

As Malcolm Wallop, a Republican in good standing and former GOP senator said: "The compromise, crafted by Commissioner Kevin Martin, will preserve the Unbundling Network Elements-Platform (UNE-P), and ... because competition will be allowed to develop and flourish, consumers, especially those in rural America, will see continued savings on their monthly bills, as well as better service."

Where Martin went wrong, along with the commission and Tauzin, and where Powell was right, was on line sharing.

Why should the Bells be allowed to force a customer to rent a second line if he wants a different DSL service over his current copper circuit? It imposes no extra burden on the Bells to provide a line that's there. All it does is allow a phone customer to pick a provider.

That's vitally important, as Powell noted, because until line sharing came about, DSL service - which can provide connections at up to nearly 20 times current dial up rates - was super expensive. To get a line would cost $600 a month or more. Covad and others have brought the price to under $50 a month.

The feds should no more allow a remonopolization of that service by the Bells than they would the sale of telephones to homeowners by a single provider.

The one thing, though, that decision may unintentionally do is bring about more cooperation between competitors to the local Bells.

As Vik Grover, an analyst for Kaufman Bros., told CBSMarketWatch.com, "The end of line sharing is a game changer, not game over."

He noted that as far as Covad, the biggest DSL competitor to the Bells, is concerned, it will have to get together with providers of voice services - AT&T, MCI, Sprint, CLECs - to provide bundled services.

The Bells' competitors have life, and they have reason to cooperate to not merely survive, but eventually to prosper.

"The cooperation of many minds," as Alexander Bell said, could lead to "great discoveries and improvements." More than the local Bell monopolists, going it alone, can achieve.
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