|Published by NetAction||Issue No. 8||March 13, 2000|
Last week, three members of the Federal Communications Commission joined four of their state commission colleagues for a Federal-State Joint Conference on Advanced Services. The conference marked the first of six field hearings scheduled by the Joint Conference to assess the status of deployment of advanced telecommunications services. This week's hearing, in Washington, D.C., focused on the status of broadband deployment in the inner cities, and on identifying examples of "best practices" of successful deployment.
Not surprisingly, there was plenty of talk about the benefits of bringing broadband to all Americans, about the need for public-private partnerships, and about the role that regulators should play in promoting rapid and widespread deployment to advanced services.
But there is one aspect of advanced telecommunications deployment that wasn't on the agenda for the field hearings. In addition to looking at what was accomplished, regulators should be looking at what has not been accomplished, and why.
NetAction believes the field hearings should be expanded to include an examination of the role the regional Bell Operating Companies have played in the deployment of these new services. We are convinced that advanced telecommunications services would have been fully deployed by now had the Bells lived up to the promises they made in the past to state and federal regulators, and to consumers, in exchange for reduced regulatory oversight.
If the goal of policy makers is to promote rapid and widespread deployment of advances services at affordable prices, it is crucial that they recognize, understand, and address the Bells' history of broken promises. The Bells are lobbying Congress to amend the Telecommunications Act of 1996 to allow them into the long distance data market without first opening their own markets to competition in accordance with the conditions imposed in the 1996 Act - most notably the fourteen-point competition checklist required under Section 271 of the Act. Letting the local monopolies into any new markets now would only lead to more broken promises.
In recent months, NetAction has been studying several years' worth of Bell financial data that was compiled by the New Networks Institute (NNI), a New York-based research organization. NNI's Bruce Kushnick has spent the past several years independently analyzing the impact of the break-up of AT&T and the creation of the RBOCs on the deployment of new and advanced telecommunications networks, as well as on telephone subscribers in general. Late last year, NNI filed a petition with the Federal Communications Commission requesting an investigation into the Bells' failures to deploy advanced networks.
The petition, which was subtitled, "How the Bells Stole America's Digital Future," documents in detail how the Bells used the promises of advanced network deployment to convince regulators to replace "rate-of-return" regulation, which protected consumers from excess profits, with alternative regulatory frameworks that allowed the Bells much higher profits. In exchange, the Bells agreed to deploy advanced services and promised that by the year 2000 almost half of America would be wired with fiber-optic networks capable of delivering up to 800 channels of digital services, at lightning-fast speeds.
Well, it is now the year 2000, and not a single Bell company has deployed an advanced network as promised. Moreover, NNI estimates that telephone customers have paid over $50 billion dollars in excess charges for advanced services that were never deployed.
Here are just a few examples from "Info-Scandal: The Bells' Greatest Broadband Failures," one of NNI's recent reports:
Bell Atlantic, in its 1993 Annual Report, announced it would be spending $11 billion over the next five years to build an advanced network capable of serving 8.75 million homes by the end of the year 2000.
Pacific Bell, in its 1993 Annual Report, announced it would be spending $16 billion over the next seven years for an advanced network that would provide broadband service to 5 million homes by the end of the decade.
Ameritech, in its 1994 Investor Fact Book, boasted that it was building a video network that would extend to 6 million customers within six years.
These companies didn't even come close to fulfilling their promises: By the end of 1999, the number of digital subscriber lines (DSL) in the US and Canada combined was only about 600,000, according to a recent report from the consulting firm TeleChoice.
NetAction agrees with the goal of the Joint Conference to encourage the deployment of advanced telecommunications services to all Americans in accordance with the provisions of Section 706 of the 1996 Act. But gathering data on the status of deployment isn't as important to America's digital future as understanding why advanced services haven't already been deployed, and holding the Bells accountable for their past promises.
Moreover, we believe that the most relevant example of "best practices" of successful deployment of advanced services is the competitive market. In stark contrast to the typical Bell practice of using ratepayer money to finance their investments, competitive telecommunications companies have invested billions of shareholders' dollars in cable networks in order to offer broadband Internet service and competitive local phone service. The result is that there are now about 2 million cable modem customers in the US and Canada, according to a report by the research firm Kinetic Strategies.
And private sector investments in cable networks have not only expanded the availability of advanced services in many communities, they've put competitive pressure on the Bells to speed up the introduction of digital subscriber line services.
Regulators should keep this in mind as the Joint Conference field hearings continue. For when all is said and done, the most important thing that policy makers can do right now to ensure rapid and widespread deployment of advanced services is to refrain from imposing any rules, regulations, or conditions that might discourage private sector investment in broadband deployment, or give the Bells a further competitive advantage.
NetAction is working with NNI to increase consumer awareness of the Bells' role in delaying the deployment of advanced telecommunications services and mobilizing Internet users to put pressure on state and federal regulators to order the Bells to deliver on their promises, or return the $50 billion they were given to deploy advanced networks. Contact at NNI or at NetAction if you can help.
Last summer, in our very first issue of Broadband Briefings, we noted that the debate over "open access" to high-speed cable Internet service was -- and still is -- premised largely on the assumption that consumers are going to favor cable broadband over competing technologies like digital subscriber line (DSL) and wireless.
At the time, we weren't convinced that cable broadband would be the consumers' top choice for high-speed Internet access. We identified both practical and technical reasons why cable broadband might not wind up being the preferred technology, and concluded that if cable isn't the preferred technology, the "open access" debate would prove to be largely irrelevant.
There is increasing evidence that our predictions were on target.
For example, InternetNews.com reported earlier this month that a new survey found consumers were more likely to choose DSL than cable broadband. (See: http://www.internetnews.com/isp-news/print/0,1089,8_314801,00.html. The Parks Associates study reported that of 6,000 consumers who planned to switch to broadband service, 34 percent wanted DSL, compared to 25 percent who wanted cable broadband. Moreoever, a higher percentage of cable modem customers said they would switch services if they could get the same speed for $10 less per month.
News reports also indicate that price competition is emerging. In addition to reduced monthly charges, there are companies planning to offer free broadband access to consumers willing to accept advertising content.
These developments just underscore our point that regulated access isn't necessary at this time.
In their continuing quest for entry into long distance markets, local phone monopolies are making increasingly outrageous claims. Given the Bells' history of broken promises that NNI has uncovered, regulators and lawmakers ought to be skeptical. This is particularly true of claims that local monopolies are uniquely capable of bringing broadband services to rural communities.
An excellent report on broadband deployment in rural communities was prepared last fall by Economics and Technology, Inc. The authors, Lee L. Selwyn, Scott C. Lundquist and Scott A. Coleman, report that a variety of technologies are being deployed in rural areas by companies interested in serving those markets. The report is available at http://www.econtech.com/brbnd9_99.pdf.
Broadband Briefings is a free electronic newsletter, published by NetAction to promote policies that encourage rapid and widespread deployment of high-speed Internet access. NetAction is a California-based non-profit organization dedicated to promoting use of the Internet for grassroots citizen action, and to educating the public, policycmakers, and the media about technology policy issues.
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