Posted: 02/2001
Breaking the Bottlenecks: The Telecom Act at
5
By H. Russell Frisby Jr.
The controversies surrounding November's presidential election and the wild ride that Wall Street gave many high-tech and telecom investors made the year 2000 truly unforgettable.
This year, we celebrate the Telecommuni cations Act of 1996's fifth anniversary and the Competitive Telecommunications Association's (CompTel, www.comptel.org) 20th anniversary. At CompTel, we remain steadfast to the pledge we made 20 years ago: to encourage opening local markets to competitive forces.
The era of the monopoly is over--although this headline apparently has been lost on some incumbents who seem more determined than ever to control everything on the board, from Baltic Avenue to Boardwalk.
CompTel has taken several steps to counter this "Do Not Pass Go" attitude. During our 2000 Fall Business Conference in San Francisco, I outlined the association's commitment to a national broadband policy. As part of this effort, we have launched a vigorous "grass-roots" campaign aimed at encouraging lawmakers to be cautious in their consideration of legislation that would amend the Telecom Act.
Moreover, CompTel has become a vocal proponent of the FCC's (www.fcc.gov) efforts to promote open access to incumbent cable facilities that are used to provide telecommunications services.
Breaking the Broadband Bottleneck
CompTel's national broadband policy embraces three goals. The first--and most important--goal is to eliminate local broadband access bottlenecks. Nowhere is this bottleneck more troublesome than in the so-called "last mile," which really is the first mile where consumers are concerned.
Broadband bottlenecks occur because the owners of these "first mile" facilities (namely, the former Bell companies, incumbent cable television companies, and foreign PTTs) have failed outright to allow competitive access to those facilities.
We recognize that such access requires governmental intervention and supervision, but CompTel believes a sensible national broadband policy must also embrace a second goal: to keep the Internet free from unnecessary regulation and "open for business" to all consumers and service providers.
Policymakers are obliged to safeguard the rights of consumers to select the broadband access technology and carriers of their choosing. This means making sure that new competitors have the same fair and equal building access--including roof rights and other access points--that the ILECs or cable companies provide to themselves and their affiliates.
At the same time, we must keep our eye on protecting network integrity, and prevent hackers and others from degrading the quality of the infrastructure that comprises the Internet.
As more of us go online for everything from research to restaurant reservations, privacy is becoming paramount to consumers.
CompTel believes the third objective of a national broadband policy should be to promote meaningful industry self-regulation for addressing such consumer concerns.
Grass-Roots Campaign
Another part of our strategy to meet the first objective of our recommended national broadband policy--that of breaking the local bottleneck--is an aggressive, grass-roots campaign.
This campaign is designed to educate lawmakers on how the Telecom Act has benefited consumers by stimulating innovation, by encouraging companies to deploy new technologies, and by opening local markets to increased competition.
Today, approximately 300 companies invest more than a billion dollars per month in infrastructure to bring new broadband and high-speed Internet access services to consumers and businesses throughout the country. These companies began as small upstarts that challenged the local incumbents' exchange monopolies.
Thanks to the Telecom Act, these companies are growing, maturing and spurring new technologies and services that benefit businesses and consumers. Even so, legislative proposals, such as last year's House Resolution 2420, which are promoted by the RBOCs, likely will emerge again in the new Congress. These bills are not the solution for increasing competition in local markets.
Instead, Congress should enhance the Telecom Act's existing pro-competitive elements, rather than eviscerating the existing pro-competitive, pro-consumer tenets of the law.
Structural Separation
As part of this effort to enhance the existing law, we ought to consider whether the Telecom Act's market-opening provisions and our rules to implement them are, by themselves, sufficient to open up markets quickly. We also ought to determine whether they can prevent the stalling that hurts competitors operationally and financially.
The difficulty with enforcing the market-opening provisions of the Telecom Act is that it is hard, if not impossible, to incent a monopolist to relinquish its monopoly.
The alternative is structural separation--as Pennsylvania recently required for Verizon Communications (www.verizon.com).
The long-distance, Internet and equipment markets are extremely competitive. In each instance, structural separation was mandated and implemented successfully. Consumers and competitors benefited in each case.
Structural separation already is required for RBOCs' long-distance affiliates, and it has been employed successfully in the energy markets.
CompTel believes the RBOCs should be split into separate retail and wholesale affiliates. Functional separation within the RBOC organization is not enough. It must be complete, structural separation.
Structural separation has many advantages. It minimizes or eliminates the current conflict that results from an RBOC's dual competitor/supplier role. It creates a level playing field, because the RBOC's retail affiliate can deal with the wholesale affiliate on the same terms as it deals with a CLEC. Finally, it reduces the need for regulation in the long term, as the need for such oversight decreases with the increase in competition.
Cable Open Access
It is crucial to tear down barriers to local exchange service competition. It also is vitally important to ensure that the same problems do not plague competitors who seek access to incumbent cable television service providers' networks, when those networks are used to provide telecommunications services.
Many consumers have access to advanced telecommunications and information services only through the telecommunications services an incumbent cable services operator provides.
Minimum cable open-access rules only can improve these customers' competitive choices.
Even for consumers who already have access to DSL services, minimum cable open-access rules will give them more choices and more competitive, market-driven rates, while they spur technological innovation.
Accordingly, CompTel has urged the FCC to adopt minimum cable open-access rules to ensure that competitive providers of advanced telecommunications and information services have access to the incumbent cable service operators' facilities.
For example, incumbent cable operators should offer transmission capacity at cost-based rates and under terms and conditions that are reasonable and nondiscriminatory. Requesting providers should have the right to use this transmission capacity and related equipment for the provision of any telecommunications or information service. Finally, incumbent cable operators should be prohibited from forcing their subscribers to buy telecommunications and information services from them (or their chosen providers) before they can have access to the service provider of their choice.
The benefits of minimum cable open-access rules will be substantial. These rules will ensure that all consumers have access to more services from more providers at market-driven rates. Such rules also are likely to spur technological innovation and create a more dynamic marketplace for information and telecommunications services by integrating the incumbent cable networks into the national telecommunications infrastructure.
Significantly, minimum open-access rules also will encourage competition in the local telecommunications services market by making the incumbent cable infrastructure a more attractive wholesale alternative for competitive carriers and providers.
Looking Ahead: 2001
Twenty years ago--before cell phones, and before the Internet--the newly formed CompTel and its members faced an uphill battle: to break the Bell system's monopoly on the long-distance market. That fight also involved access to local network facilities.
The resulting years of debate over access charges and tariffs were fraught with conflict, but also--I am pleased to say--victories that have benefited consumers and competitors.
Sometimes the rules had to be rewritten more than once to accommodate the rapid pace of technological advances. Whether at the federal or the state level, there were times it seemed that the competitive industry drew a "Chance" card that imposed a minor--or even a major--setback.
Yet, competition has prevailed.
I am confident that CompTel will remain on the front lines of the fight to preserve the gains that the competitive industry has made throughout the years.
The tools for victory--a national broadband policy, a Congress that is sensitive to consumers' and competitors' needs, and an open cable market--are well within reach.
H. Russell Frisby Jr. is president of the Competitive Telecommunications Association (CompTel, www.comptel.org). He can be reached at +1 202 296 6650.
ROUNDTABLE
...On the fifth anniversary of the Telecom
Act ..."This is a perilous time. Five years after the act [was signed into
law], there have been great successes. But there also have been, and continue to
be, great frustrations because competitors still must rely on the incumbents for
connectivity to the last mile."
--Ernest B. Kelly III, president, the Association of Communications Enterprises (ASCENT, www.ascent.org)
"Innovation ... leads to choice in the marketplace and results in the kind of competition that Congress had in mind when it passed the 1996 Telecom Act. There are innovative companies."
--Ken Figueredo, principal consultant, Analysys Consulting (www.analysys.com)
The Telecom Act "is one of the most efficacious pieces of business law passed during the 20th century. The act has unleashed hundreds of energetic competitors. As a result, telecom technology has blossomed, service has improved, and the cost of service has fallen. I would even assert that the Telecom Act has been a significant factor in the current period of unprecedented economic growth."
--Jeffrey G. Moore, senior analyst of network services, Current Analysis Inc. (www.currentanalysis.com)
"There continue to be great regulatory debates over the challenge of all competitors riding the ILEC copper as the physical last mile."
--Robert G. Berger, president and CEO, CityNet Telecommunications Inc. (www.citynettelecom.com)
