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Contact: Bruce Kushnick or Miranda Berner 212-777-5418, News@newnetworks.com
FOR IMMEDIATE RELEASE: August 2nd, 2001 To Read the Report: http://www.newnetworks.com
THE FIBER-OPTIC FIASCO AND AMERICA'S COPPER DIRT ROAD" New York. ---- In a new, suggestive analysis New Networks Institute (NNI) lays out a series of related events and actions on the part of the Bell Companies that have contributed in a major way to the tech sector crash and will hamper the sector's recovery and the roll-out of broadband services. In its Special Report, "The Bells and the Current Recession: The Fiber Optic Fiasco and America's Copper Dirt Road", NNI claims that the Bell companies failure to roll out their broadband services as promised along with their longstanding anticompetitive behavior in the face of regulations and law obligating them to open up their monopolies to competition has scared away investment and diminished the growth prospects in the tech sector. These actions have contributed substantially to the sector's current problems and decline, as well as the harm to the entire economy. "I believe the evidence supports the conclusion that until the incentives and ability of the Bell's to harm competition and largely control the timing and location of broadband deployment on their terms is mitigated, the tech sector that depends on the rollout of the next generation of these services is destined to be under Bell control," said Bruce Kushnick, executive director of New Networks Institute. "Everyone from Intel to Lucent, McLeodUSA to Covad, to the FCC has had to deal with the prospect that, by and large, the Bells will determine where and when broadband service will be offered for the next several years. The notion that competition will drive broadband deployment and pricing at the retail level is a fantasy. Worse, waiting for the Bells to deploy is like waiting for Godot… the fictional character than never shows up." According to the report the Bell companies have successfully defended their aging copper wire phone networks and have marginalized many consumers and companies hoping to build a new product and service line on broadband capabilities. Unless the industry and regulators find a way to undermine Bell monopoly power and control, investment in broadband deployment and the health of a significant segment of the tech sector will continue to be at the mercy of the Bell Companies. "The Bell Companies, of course, are doing exactly what one would expect them to do. They are defending their legacy investments. But in locking out competition and innovation so effectively, they are hampering the recovery of the tech sector and the economy at large. Congress and the Administration should be aiming to act immediately to address and fix the bell caused problems, or the economy will continue to suffer, Kushnick added. The Fiber-Optic Fiasco and America's Copper Dirt Road. It is a little know fact that by 2000, over half of American households and the majority of schools, libraries, hospitals and government agencies were supposed to have been rewired with fiber-optics to the home, school and office. In fact, the Bells convinced state and federal regulators that if they changed laws to give them more money, they would use these funds to replace the aging copper network. None of these services exist today, even though America spent over $50 billion dollar in extra charges on phonebills. To read our analysis and report about the Bells' failed broadband rollout, published by NetAction, see: "How the Bells Stole America's Digital Future". http://www.netaction.org/broadband/bells/ "Did America really spend over $50 billion dollars for services they never got? Did America really pay the Bells to keep their copper networks? Is an inferior ADSL service over copper wiring the best it will ever be?" asks Bruce Kushnick. More to the point, a recent Bell funded Brookings Institute study claims that broadband would generate an additional half trillion dollar benefit. The title says it all: "The $500 Billion Opportunity: The Potential Economic Benefit of Widespread Diffusion of Broadband Internet Access". This $500 billion obviously puts a price tag on the opportunity cost (or should we say, opportunity lost) for customers in the absence of deployment over the last decade. It is the cost of Bell behavior that obstructed competitive deployment. It is the cost of what happens when the Bells block others from deploying broadband. How does it all tie into the recession? Connect the dots….The entire downturn of the tech sector has been blamed on creating the recession. The report contends that the missing generation of technology over fiber-optic wiring, and the Bell companies' monopolistic behavior toward competitors, has been the catalyst for the current economic downturn. Had the Bell companies actually rolled out their promised networks --- fiber-optic wiring to the home, and the wiring of schools, libraries, hospitals, and government agencies, then there would have been a new generation of very high bandwidth applications that would have been adopted by customers. More to the point, every tech and telecom segment, from the supplier of fiber-optics, such as Corning or the network suppliers, such as Lucent and Nortel, to the content companies that are supplying 'streaming-media' and telecom 'soft-switch' applications, would have flourished. This new generation of applications would have also spawned the need for higher-performing computers, new software applications, new computer chips to drive these machines and software, and every other conceivable add-on device, from digital cameras to CD-read-writes. From the historical perspective, companies require multiple years to design and sell fiber-based products. Business cycles were put into motion. And all of these companies go stuck with product programs for fiber-based services that never materialized. Harm to Competition: The second part of the equation is the documented harm caused by the Bells to Internet Service Providers (ISPs) and CLECs, (Competitive local phone services). In a companion report "The Bells Harmed the CLEC Industry", we supply the CLEC's perspective, as well as a litany of evidence of the harm to competition. Over $130 billion dollars in value has been wiped out, in a large part because of the Bells' treatment of competitors, not the CLECs' business plans. See: http://www.newnetworks.com "The entire industry is on life-support. The Bell companies have caused most of these business direct harm --- with everything from delivering sub-standard customer services, to even illegal acts, including stealing customers" added Kushnick. This impacts the company's ability to purchase new switches, routers, servers, computers, and all other hardware services, further lowering the purchases from vendors. Harm to Customers and DSL: The Chain-of-Pain The Bells have also harmed the entire current DSL and Broadband markets. In NNI surveys of ISPs using CLECs, about 50% of all orders have problems. This equates to a slow, painful rollout of DSL because the Customer, the Internet Provider and the CLEC are all beholden to the Bell for service. To read our summary of this problem see: "The Broadband Bill of Rights". http://www.newnetworks.com/broadbandbill.htm What To Expect: The Bell "Ball And Chain" Will Drag The Economy Down. Like a large iron ball attached to the leg of the economy, in order to bring back the capital markets to the competitive industry, in order for there to be any future in broadband, and in order to change the direction away from making the copper-network the network of choice by default, there are a series of steps that need to be taken that fixes telecom and competition issues. "Accountability, enforcement and customer refunds should be the agenda for fixing the telecom and the tech sector's woes. Unfortunately, the regulators have been asleep at the wheel and there's lots of talk, but we do not expect the FCC or the state public service commissions to enforce the current laws. Thus, the capital markets will not want to invest in these companies. This equals continued softness in all tech markets and continued economy problems" Kushnick stated. The report provides a "most likely scenario" for the next three-five years. However, if proposed bills go through, such as Tauzin-Dingell, HR1542, the situation will decidedly worsen because the remaining competitors will all be put out of business by the monopolies. "Ironically, the tech companies, such as Intel, have yet to look at history and are backing the wrong horse--- the Bells. Anyone who owns stock in a tech company or competitive local phone company should be considering law suits against the Bells for their harm to their financial investment" stated Miranda Berner, Director of External Affairs for NNI. New Networks Institute is independently funded. For more information, please call Bruce Kushnick or Miranda Berner at 212-777-5418. |