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Bruce Kushnick Bruce@newnetworks.com Phone 212-777-5418 Joe Plotkin, BroadbandNow Joe@broadbandnow.com To Read "Our Digital Future", Report 1
FCC Should Not Allow Bell Atlantic, New York Into Long Distance Because Of Monopoly Harm To ISPs New York, NY ---December 21st, 1999 ---- New Networks Institute (NNI) today released an alarming report that demonstrates Bell Atlantic is stifling New York's digital future by blocking fair competition through predatory pricing of ADSL Internet service. This first report in "Our Digital Future" series is titled "Bell Atlantic is Using Predatory Pricing for DSL that is Designed To Eliminate Internet Service Providers." "Based on interviews with ISPs, and an examination of Bell Atlantic's current discount schedule for Internet Providers, NNI has found that virtually no ISP can be profitable offering Bell Atlantic's ADSL product. Also, it is obvious that Bell Atlantic.net (Bell Atlantic's Internet company) is selling services below cost, even though BellAtlantic.net is a separate company," stated Bruce Kushnick, Executive Director, New Networks Institute, (NNI) Bell Atlantic is currently seeking approval from the FCC to offer long distance service. However, since BA is stifling competition, and has not fully opened its markets to competitors, this report concludes that the FCC should deny Bell Atlantic entry into long distance Understanding the ADSL Issues ADSL, Asymmetric Digital Subscriber Line, is an advanced network product that gives residential and small business customers a choice of faster speeds, including 640K, (Kbps) and over 1 Mps. Traditional Internet and Web modems usually travel at a speed of 56K. Bell Atlantic ADSL is sold to ISPs with a discount plan, dependent on their sales volumes. However, these discounts are too small, and the costs to competitors are too large. The main problem is that there are a number of hidden expenses an ISP must pay to offer ADSL --- including everything from hardware rental to purchasing enough bandwidth from Bell Atlantic to be able to handle customers. When all of these extra costs are added in, the ISP has to spend more than they could ever make. The Report also has additional analysis of the 'Most Efficient Case" scenario prepared by BroadbandNow. Their data shows that an ISP's best case would still lose money. "Based on our data models, there is no way an ISP could stay in business selling ADSL. However, the real problem is that someone is subsidizing Bellatlantic.net because it has to have roughly the same costs as other ISPs" stated Joe Plotkin of BroadbandNow, a marketing and consulting firm. Kushnick said "It looks as if Bell Atlantic is 'cross-subsidizing' their Internet provision, meaning that while the Bell ISP loses money (and is taking away marketshare from the ISPs), the Bell phone company is also making money on its sale of circuits. As the monopoly provider, they set the wholesale price, and as the dominant retailer, they cap the revenues. The deck is stacked against all other industry players." "If this monopoly abuse is happening in New York, and this is supposed to be the free market, digital capital of the world, imagine how bad it will be for the rest of America. During interviews with ISPs from across the country, NNI found the same type of predatory pricing and cross-subsidization is happening within the other Bell companies as well," added Kushnick. The issue of treatment of competitors is also important now because Bell Atlantic must convince the FCC that their networks are fully open before they can be allowed into long distance service. A recent study released by the Department of Justice, clearly outlined that Bell Atlantic has not fulfilled its obligations under Telecom Act and should be denied entry into long distance. This NNI report, highlighting predatory pricing in competitive DSL provision, substantiates that position. A second report is even more controversial. Titled "Bell Atlantic is Supplying Sub-Standard Customer Services to DSL Internet Providers and Their Customers: A Model For ISP And Customer Compensation", this report calls for an investigation into Bell Atlantic's sub-standard customer services and strongly suggests customers should be paid compensation for the Bell's inability to deliver adequate service. For more information contact. Bruce Kushnick at bruce@newnetworks.com, or 212-777-5418. |