TCS Daily

Close the Internet?

By Duane D. Freese - July 25, 2003 12:00 AM

The Baby Bells are an awful lot like Little Orphan Annies. For when it comes to broadband investment, it's always tomorrow, tomorrow, I love ya', tomorrow. And tomorrow is always just a Federal Communications Commission decision away.

The latest rendition of this song was at a House Energy and Commerce subcommittee on Monday. There Verizon Vice President Tom Tauke expounded about how Verizon would substantially increase its current $12.5 billion capital budget to roll out fiber to the home, or some facsimile thereof, as soon as the FCC issues:

  1. "A strong Triennial Review order that cannot be gamed and that makes it clear broadband technologies will not be subject to rules devised for traditional voice networks.
  2. "A 'hands-off broadband' national policy that sends a clear signal to Wall Street, saying government will permit all builders and providers of broadband services to compete on an equal basis and will let the market declare who wins and loses.
  3. "An end to destructive price rules that siphon money from incumbent phone companies and direct it toward arbitrageurs who use it only to line their own pockets, when it could be used instead to support new investment."

These changes, all being worked up by the commission, are necessary, according to Tauke, to bring about regulatory "parity" for the Bells with cable companies, which he claims now control two-thirds (actually 57 percent) of the high-speed lines into residential homes because they aren't hampered by the open access provisions to their facilities the Bell telecom giants face.

It all sounds so reasonable. It sure did to the Subcommittee Chairman Fred Upton, and Commerce Committee chiefs Billy Tauzin and John Dingell, who all called on the FCC to move swiftly to deregulate the Bells' broadband lines. But it hardly reasonable to anyone interested in maintaining the Internet's open architecture.

For as critics have pointed out, removing broadband from rules "devised for traditional voice networks" and establishing a "hands-off broadband" approach, while seemingly encouraging Verizon investment, amounts to this -- giving control over content on the Internet to a handful of communications megaliths. It would mean you wouldn't have a choice of Internet Service Provider, but could be limited to a handful or, maybe, just one, and they could determine what you see and where you travel on the so-called Information Superhighway.

Corralling ISPs has long been a goal of the telcos, who view them as "free riders" on their networks. If the FCC and Congress hadn't stepped in to stop them, the Bells would have strangled the ISPs and the Internet at birth a decade ago by applying per-minute access charges to Internet connections. Such charges were needed, they claimed then, to keep the phone system from becoming overrun by heavy Internet users.

That didn't happen because, as the American ISP Association points out, ISPs built the Internet we know today. ISP investment helped actually expand the phone system and made it more efficient. The Bells profited mightily when their customers bought second lines into their homes to use the net.

But now -- to further investment in broadband connectivity -- there is a need for "parity," in particular between the phone companies and cable firms. "We must create a regulatory regime that does not favor any one technology or provider, but instead creates parity," Dingell said at the hearing.

So, Congress -- which is aghast at the FCC's modest changes in media ownership rules because of fear that a few media companies will control the nations' information flow -- is willing to hand control over content of the nation's fastest growing information medium to the handful of owners of the conduit by which its delivered? All for the sake of parity?
Parity is silly. There is never true parity in anything, certainly nothing in which development and technology differ as much as cable and phone networks.

Cable was -- and still is -- a shared medium. As Angele Gilroy and Lennard Kruger put it succinctly in their report for the Congressional Research Service, Broadband Internet Access, "Because cable networks are shared by users, access speeds can decrease during peak usage hours, when bandwidth is being shared by many customers at the same time." Thus, video subscribers might lose channels if foreign ISPs were given free rein for broadband services, and the broadband services themselves might slow to a 58-kilobit modem crawl without controls. With a shared system, there is always a problem of policing usage.

The same circumstance doesn't apply to telephone lines, as Dingell knows, because phone lines are dedicated -- from home to central office. So, having a host of ISPs doesn't matter. It's just a matter of hooking up phone lines.

Furthermore, as Sue Ashdown of the American ISP Association has noted, "The nation's phone networks were constructed by the public, over nearly a century, with government protection and subsidization. It is factually incorrect to pretend that these networks are now somehow private, deserving of any right to discriminate against the public citizens who use them, by encouraging private deals that will foreclose access by competitors."

ISPs and private consumers aren't the only ones facing damage if open access ends. Small businesses, which depend upon broadband over telephone networks because of cable's technological limits, could face steeply higher bills. Only the competition engendered by open access has made broadband affordable for many of them, with prices dropping from nearly $3,000 a month to less than $500.

Meanwhile, the cable system with which the Bells seek parity in regulation was built with private venture capital. Even so, and despite technological limitations, the industry has thus far agreed -- spurred in part by competition from high-speed phone lines -- to voluntarily (or in order to win federal approvals for mergers) allow additional ISPs to service customers.

More open access, thus, is a public policy that ought not to be thrown overboard quickly, certainly not on the "promise" of more investment tomorrow. For that no doubt will remain always a day away unless competition, not FCC rulemaking, forces it upon the phone giants.



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