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Tech Industry

No special favors for telco monopolies

Rep. John Conyers Jr. says the Bell companies must be prevented from leveraging their historical phone service into the emerging broadband field.

    Almost daily, we read the headlines that companies offering new and innovative broadband services are declaring bankruptcy, downsizing, scaling back service, or closing their doors altogether. Already this year, over 7,500 people were laid off by competitive broadband providers.

    Not surprisingly, the decrease in a vibrant, competitive broadband market has led the local Bell Operating Companies to raise their prices for DSL (digital subscriber line) broadband services. Since February, both SBC Communications and Verizon have boosted their monthly fees for new DSL subscribers from $39.95 per month to $49.95, and BellSouth and Qwest Communications International have signaled similar hikes. Thus, the facts have borne out what we learned in Economics 101: Less competition leads to higher prices.

    On May 3, 2001, Representative Cannon and I introduced bipartisan legislation--H.R. 1697, the Broadband Competition and Incentives Act of 2001, and H.R. 1698, the American Broadband Competition Act of 2001--to stem the tide of broadband provider bankruptcies and ensure greater competition, more innovation and lower consumer prices in the emerging broadband market.

    Local telephone service is still owned by monopolies that control over 90 percent of the market--monopolies which, historically, were created and maintained by the federal government. It is this unique history which has driven both the courts and a bipartisan Congress to require that the local telephone monopolies' facilities be opened to competitors. Indeed, that principle drove the passage of the 1996 Telecommunications Act, which is widely credited for spurring a new generation of competition and innovation in telephony.

    Tauzin-Dingell: Wrong approach
    At this critical juncture, however, when the local telephone networks are being used as the essential facility to launch DSL broadband Internet service, some want to end this bipartisan policy against monopolization. The legislation introduced by Representatives Tauzin and Dingell, H.R. 1542, dismantles the anti-monopolization provisions of the '96 Act. The bill would give the local Bell Operating Companies totally unregulated monopoly control over local telephone markets, which can then be used to leverage similar monopoly control over broadband services.

    Thus, rather than developing more competition in both the telephone and broadband markets as Congress envisioned when it passed the '96 Act, the Tauzin-Dingell bill would solidify monopoly control over these two markets. In short, repeal of the bipartisan '96 Act's competition and open-access requirements would dramatically increase prices and decrease competition and innovation.

    Instead of pursuing this path, we should embrace a more pro-competitive, pro-consumer approach to ensuring a competitive--and thus more robust--release of broadband services. H.R. 1697 and H.R. 1698 take on this pro-competitive approach in four important ways.

    First, the bills ensure that the Bell companies cannot escape the market-opening requirements of the '96 Act unless they no longer have a monopoly in the business and residential phone markets. In this way, the bills will prevent the Bell companies from leveraging their historical monopoly over phone service into the emerging broadband field.

    Second, the bills require that disputes relating to existing competition requirements for local telephony be resolved more speedily through arbitration.

    Currently, even the simplest disagreements between the Bell companies and their competitors are tied up in court, often for years. Our arbitration process will be more efficient and expeditious, and will help broadband providers obtain greater certainty about their obligations. It also means that companies can focus on what they do best--providing telecommunications services--rather than being tied up in court.

    Third, the bills ensure that the antitrust laws continue to protect against anti-competitive conduct that could gouge consumers.

    The largest fines that the FCC can currently impose on Bell companies for their flagrant violations of the '96 Act are miniscule in comparison to their daily revenues. To the Bells, the fines are simply a cost of doing business, and for this reason, they continue to flout the law with impunity. Our bills would make violations of the anti-monopolization provisions of the '96 Act violations of the antitrust laws--exposing violators to treble damages and prohibiting them from jointly marketing their broadband services with other offerings.

    Our bills ensure that the penalty fits the crime, and that the punishment actually deters violations from happening in the first place.

    Fourth, our bills provide $3 billion for loans to broadband providers to encourage them to deploy high-speed networks in rural and underserved urban areas. In order to be part of the 21st century economy, all Americans must have access to broadband service, just as all Americans needed access to telephone service in the 20th century.

    We don't need to do special favors for monopolies. We need more competition, more innovation and lower consumer prices.