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Opponents chime in on broadband Bells

Legislation from two House leaders could help close the digital divide, but its opponents argue that it will simply transfer a local phone monopoly to the Web.

    WASHINGTON--Much-anticipated legislation from two House leaders could help close the so-called digital divide, but its opponents argue that it will simply transfer a local phone monopoly to the Internet.

    There isn't much middle ground in the debate between Congress and the telecommunications industry over a high-profile bill expected to be introduced later this month by the top two members of the House Commerce Committee, Billy Tauzin, R-La., and John Dingell, D-Mich.

    Their efforts to permit Baby Bells--SBC Communications, BellSouth, Verizon Communications and Qwest Communications International--to send Internet data traffic across long distances has prompted opposition from an ad hoc coalition of foes including competitive DSL providers and other Internet service providers, long-distance and local competitive phone companies, and various telecommunications and Internet trade organizations.

    Opponents to the see story: Find a broadband provider bill claim it will gut the Telecommunications Act of 1996, thus making it even more difficult for Bell competitors--struggling for customers, venture capital and profits--to compete. The Bells are one of the few sectors in telecommunications to remain stable amid the current economic meltdown and related telecommunications bloodbath.

    "We face the very real possibility that the Bell companies could re-monopolize the industry," said Competitive Telecommunications Association (CompTel) President Russell Frisby.

    But to the bill's backers, the legislation is about simple fairness.

    "When telephone companies offer their competing high-speed service, DSL, they are required not only to provide nondiscriminatory service to independent ISPs, but they also must make portions of their facilities available to competitors" unlike other broadband providers, said U.S. Telecom Association (USTA) President Gary Lytle.

    The upshot for consumers is unclear thus far. The bill could provide high-speed Net access to more residents of rural areas. It could also provide competition for communities served only by cable-based Net access. But in doing so, it could also provide the Bells with a near-monopoly in some areas, and could lead to lengthy foot-dragging by the Bells if a third-party company wanted to compete using the Bells' networks, as a company like Covad Communications does now.

    Interconnection is the key
    Under the landmark Small towns in the fast lane Telecom Act, which was intended to open up telecommunications in the United States to competition, Bells are prohibited from sending voice or data along their phone networks beyond a range designated by regulators as a local calling area. If it's a voice call, it's picked up by a long-distance carrier, and if it's a data call, it might be transferred to a fiber network operator.

    Confusion over jurisdiction quickly sets in, however. Qwest, for example, has an international fiber network. But it also owns the former Bell US West. So, within US West territory on US West network facilities, Qwest has to operate under Telecom Act restrictions.

    The Bells say they'd have an incentive to offer DSL to remote areas if they could carry the data, rather than bringing in a third party. For long-distance voice traffic, the Bells would still have to complete a comprehensive process at the Federal Communications Commission proving they were fostering competition, something only approved for Bells in four states to date.

    But opponents fear removing the hurdle of local competition for long-distance data services could eliminate any incentive for the Bells to open their networks.

    Competitive Broadband Coalition Executive Director David Rubashkin noted that SBC already has voluntarily paid millions in fines for refusing to cooperate with competitors to unbundle parts of its network for use by these third parties.

    "Paying fines has merely become a cost of doing business for SBC," Rubashkin said. "While SBC and the other Bell monopolies can't seem to offer quality basic local phone service, they're lobbying to extend their monopolies to broadband. That's a reward they haven't earned."

    A recent Association of Local Telecommunications Services study found that the Bells still served about 92 percent of the local phone market and were increasing their dominance in DSL, controlling 78 percent of that market in the fourth quarter of 2000.

    However, even with several competitive DSL companies going bankrupt or facing possible delisting, it's not entirely clear their problems stem from a failure to interconnect properly with the Bells.

    "One assumption that is only slowly being challenged is that a fully open and competitive local loop (local network) is likely to be the best way to force competition," said Dataquest analyst Bhawani Shankar. "This policy can succeed only when an economy is growing and when finance is plentiful. In an economic downturn, carriers will be reluctant to make the investments to access the local loops of incumbent players."

    Shankar said that "they will not be able to calculate what, if any, return will be generated by services that have yet to be designed, let alone tested. The policy of unbundling the local loop may need to be reviewed. It may not be the way to close the digital divide."

    Closing the digital divide
    There are dozens of proposals circulating on Capitol Hill on ways to encourage broadband offerings to rural and inner-city communities to close the so-called digital divide. The bill with the most momentum is one by Sen. Jay Rockefeller, D-W.Va., that would provide tax credits of 10 percent to 20 percent to companies investing in the effort.

    But many on Capitol Hill expect the Tauzin-Dingell bill to dominate the debate once it is introduced. Tauzin spokesman Ken Johnson said that should occur shortly after the House returns from a two-week spring recess April 23.

    For one, the backing of the Bell companies gives the bill momentum. Bells are among the leading financial contributors on Capitol Hill, giving generously not only to Tauzin and Dingell but many others including the Republican and Democratic parties.

    In addition, there is general agreement on the Hill that faster broadband deployment is a high priority and that all industries are not regulated in the same manner in high-speed Internet access.

    Last year the bill managed to snare a majority of the House as co-sponsors, but it was blocked by a stubborn committee chairman. This year the bill is expected to move to the House floor with ease. There are indications that Tauzin and Dingell will allow the bill to be modified somewhat to be more inclusive of other technologies, but most Hill staff familiar with the bill expect the core element, that of freeing Bells to provide data services over long distances, to remain.

    But that part of the bill is exactly what troubles opponents.

    "If enacted into law, this legislation would rob consumers and benefit only the Bell companies," Tom Santaniello, public policy manager of the Computing Technology Industry Association (CompTIA), said in a letter to Congress on April 5. Santaniello said in an interview that defeating Tauzin-Dingell was CompTIA's "highest priority."

    Many other groups have joined CompTel and CompTIA in opposing the bill even before it has been introduced, including the Information Technology Association of America, the Commercial Internet Exchange, the Association of Local Telecommunications Services, the Association of Communications Enterprises representing telecommunications resellers, the Personal Communications Industry Association, the American ISP Association, and the Competitive Broadband Coalition, the latter a group that includes AT&T, WorldCom and Sprint.