Idiots Delight on the Animal Farm.
A Personal Perspective From Bruce Kushnick
About the FCC's New Local Competition and Broadband Rules.
Five monkeys with typewriters may have been able to come up with a more
coherent and useful plan for the future of Telecommunications and broadband
than the rotten bananas of regulation being proposed by the FCC.
The goal of the FCC's rule making was supposed to fulfill the Telecom Act's
primary goals ---to bring in competition that would lower prices, and to
bring America broadband. However, it is clear that the FCC's incoherence in
this proposed plan, exposed by the fact that almost every commissioner is
dissenting on some part of it, except for Kevin Martin, (who's proposal won
the day even though it was inspired by "Tom Tauke" of Verizon) is a clear
sign that the monkeys are loose on the animal farm.
For a longer discussion of what's wrong with Martin's Plan see:
http://www.newnetworks.com/dearcommissionermartin.htm
The main problem is that there are a number of interlocking parts, --- The
FCC was to analyze companies who resell local voice phone service to
consumers, companies who sell to businesses local phone service, Internet
providers and competitive local data companies who sell Internet and Data
Services using broadband, and various combinations, and each part needed to
be decided on their own merits.
Instead, what we got was essentially a Rube-Goldberg contraption that
makes reading a phonebill look simple.
The primary winner of this entire process are --- the lawyers, who will now
have a field day in all of the ill-conceived laws and next steps. The winners are
definitely not most competitors, and definitely not the customers and
consumers of broadband or competitive local phone services.
Voice Competition and UNE-P
When a competitor wants to use the network there are numerous ways they can
purchase the parts, known commonly as UNE-P, or they can purchase the use of
the entire phoneline and go from there. (This is a very simplified model)
And the only competitors that won at some of this decision are those who
sell local phone UNE-P services in specific states --- states that like competitors.
Instead of a coherent national policy, the FCC dumped these issues in the
laps of the under-funded, politically attached state public service
commissions, and this means 51 state commissions now have to have separate
proceedings to determine the rates for companies -- and this will mean law
suits in every state. And, of course, each state has its own opinions of
competition, or the lack there of.
But in order to determine exactly what all of the details mean you need an
encyclopedia written in numerous languages, just to read even the press releases' fine
print. For example, if the state decides to not act and does not do a proceeding on
this topic, then the Bells will no longer be obligated to resell their
services to competitors in that state.. And caveats abound for example,-
the Bell companies do not have sell services that use
Packet switching. "Incumbent LECs are not required to unbundle packet
switching, including routers and DSLAMs, as a stand-alone network element.
The order eliminates the current limited requirement for unbundling of
packet switching."
Packet switching, the sending of small digitized packets of information that
make up, say a web site or a phone call, is the primary way the Internet, Voice over
IP, DSL and most other services work these days.
And blocking the use of networks that are part of the common use today
is, well, more monkey business than good business practices.
If this is the good news.....
The Broadband Wipe Out. ----Line Sharing is Killed off.
For a commission interested in stimulating broadband deployment, the
stupidest thing to do is to get rid of services competitors are already
using. For example, today, another company can offer services using
"Line-Sharing", meaning that they can use the same phoneline for voice and
data services.
This new law says that line-sharing is no longer going to be available, and
you have three years to get the customer to some other new service, or lose
the customer.
Talk about a chilling affect on every company who offers services using
line-sharing, or everyone who owns stock in companies that have based their
business plans on line-sharing. According to Powell, "40% of DSL providers
use line shared inputs. The decision to kill-off this element and replace it
with a transition of higher and higher wholesale prices will lead quite
quickly to higher retail prices for broadband consumers." .
We expect that this activity alone could destroy the entire Internet
Provider market and Competitive Local phone companies (CLECs)
who they depend on Line-sharing -- Who's going
to invest in a company who's major business dies in three years?
This is a stupid, anti-competitive move that will most likely end in law
suits. ---- more rotten bananas.
Customer-Funded Networks Given to the Bells for Personal Use.
But what truly separates the simply bad ideas from the truly bad ideas is
the fact that the FCC's decision essentially turns over the entire future of
wireline broadband to a group of four companies who's broadband track record
smells worse then when you clean out the monkey cages after they've eaten
rotten bananas. The FCC plans states that if the Bell upgrades the current
networks with fiber, they have exclusive rights to the networks and do not
have to resell it to any other company.
This week we filed a complaint with the FCC pointing out that their
broadband data was seriously flawed. It neglected the facts --- In most
states, the Bell companies promised to deploy fiber-optic based
broadband services in exchange for financial incentives in the form of
higher phone rates. And the facts show that NO Bell company built any of the
promised networks, even though customers paid for it.
For example, in Pennsylvania, Verizon PA is being held accountable for their
promises to have half of the state wired with a fiber-optic 45 mps
two-directional, service, including all rural, urban and suburban areas, by
2004. We estimate that the Bell collected $785 per household - $2.1 billion
dollars, in excess fees to date and there's no network in sight.
http://www.newnetworks.com/prpenncomplaint.htm
But the FCC is betting that giving the Bells exclusive access to any new
fiber-based networks will make these companies actually build something.
More to the point, every customer reading this should realize that they
already paid for the development and implementation of networks that, if
ever built, will be solely owned, without any obligation to allow
competitors to use these networks -- meaning, the customer got screwed
numerous times To read out recent Complaint with the FCC see:
http://www.newnetworks.com/FCCbroadbandcomplaint.htm
What's missing?
If the FCC wanted to make sure that there would be competition to lower
prices and speed the deployment of broadband, the last thing you do is harm
the companies that are currently competing and drive them out of
business --- as well as the harm to their customers who depend on them.
First, there's been hundreds of complaints filed at the FCC over the Bell
companies treatment of the current competitors. A recent survey of Internet
Providers found that over 40% of all orders have some problem. The current
ruling, as pointed out by Commissioner Copps, does not have any
"performance" metrics -- meaning an accounting of whether the Bell company
is complying with the law. . To read the results of the a recent ISP survey,
as well as information about the impacts these laws could have on small
businesses see:
http://www.newnetworks.com/smallbusinessimpactstudy.html
So, if the Bell adds two feet of fiber-optic wiring to an existing site, it
means that they can automatically deregulate that junction box to block
competitors from using it... Deregulation by the inch, whenever you want it.
Secondly, these entire proceedings have been stacked against the small
businesses, not only small business Internet and broadband competitors, but
also small business who depend on these services. In fact, the Small
Business Administration's Office of Advocacy stated that the FCC should have
revised its entire process because it did not take into account its
obligations under the Regulatory Flexibility Act, which requires the FCC to
examine the impacts its laws will have on small businesses.
http://www.sba.gov/advo/laws/comments/fcc03_0205.html
Thirdly, on the issue of pricing of UNE-P, the Bell companies continually
whine that they lose money from selling below cost to the competitors.
The FCC has never bothered to just take out an annual report or 10Q and
examine the profits of these companies. It shows that the Bells' profits have continually
increased and they are still some of the most profitable companies in America--- ALL from
local phone services. Also, the FCC has never bothered to complete the audits it started
which showed that the current network expenses have been inflated by the inclusion of over
$20 billion dollars of missing equipment.
How much do the networks really cost? To read a report on the Bells'
profits: http://www.newnetworks.com/profitreport2002.htm
To read about the FCC audits see: http://www.teletruth.org/audit.html
Mighty Joe Young and King Kong Knocked off their Towers. The only thing that
we believe was a benefit in this entire process was to make the Mike Powell
understand that his ideas were not even the prevailing view and that he needs
to consider the other suggestions. (Even though he is Chairman, he was not
in the majority.) To date, he's been beating his chest as if he was the only
game in town. It was also good that the Bell-connected Commerce Committee
Chair, Billy Tauzin, who sponsored Powell, and has also tried to get even
more draconian laws passed that would not only eliminate broadband
competition but also all phone competition, will now also be questioned,
and it will be harder for them to totally kill competition, though they both
will try. In 2001, we suggested that Tauzin should recuse himself from
voting on Telecommunications and broadband issues because of his numerous
ties to the Bell companies -- companies he is supposed to be overseeing.
See: http://www.newnetworks.com/TauzinDingellisevil.htm
"Tauzin-Dingell" is the definition of Campaign financing and when it passed
in the House in 2002, the vote was not along Democratic or Republican lines,
but how much money each Congressmen got from the Bell companies. See Open
Secret's article. http://www.opensecrets.org/alerts/v6/alertv6_44.asp
In short, it's fun to go to play on the animal farm, but the next time I'd rather have the
monkeys in the cages than making laws that will kill competition and
broadband deployment.
Let the law suits begin,
Bruce Kushnick, Observer on the animal farm.