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Bells Win Another Round
By Khali Henderson
August 01, 2005 - Article
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Telecom’s battleground for consumers now has officially two warring camps — the cablecos and telcos. This situation was assured by the June U.S. Supreme Court decision upholding an FCC ruling against Brand X Internet LLC that frees cable operators from requirements to open their broadband lines to other ISPs.

While the court’s finding only addressed the classification of cable modem services, it is widely believed to give the Bell companies grounds to prevent competitors from reselling their broadband facilities. Indeed, FCC Chairman Kevin Martin said in a statement, “This decision provides much-needed regulatory clarity and a framework for broadband that can be applied to all providers.”

Following the network-sharing losses they suffered in the FCC’s Triennial Review of the Telecommunications Act of 1996, competitors now are finding another door about to close. Many had counted on running IP telephony services — competitive to incumbent voice services — over cable and Bell broadband facilities. Experts say the ruling makes it impossible for the FCC to stop cablecos from portblocking. Should the Bells be freed from network-sharing requirements, the same would be true for VoIP services blocked over their facilities.

So, the Bells — when soon freed from network-sharing requirements — will be able to concentrate on one competitor in the cableco. Already, they are digging in their heels. SBC’s $15 residential DSL is a prime example. I don’t think this is as much a gambit to attract cable modem users as it is one to stave off attrition for their traditional phone services. Follow me: The lower price tag appeals to an untapped market segment of costconscious users that had not been convinced to pay premium prices for standalone broadband service from any provider — Bell or cableco. At $15, why would SBC suddenly risk cannibalizing its own higher-priced broadband subscribers? It sees the threat of VoIP over cable modem — a combination that takes the Bell company right out of the home of the frugal buyer who is more than eager to ditch his Bell voice line to get voice and data for less. Being unseated makes the end game — the triple play — infinitely more difficult.

So, the Bells will work to gain the entertainment piece while creatively fending off challenges to their voice and data footholds. The cablecos meanwhile are taking the opposite track. Where the Bells have an advantage is with mobile wireless services — the fourth leg on the stool the cablecos presently cannot match.

While the two sides duke it out, the prices for broadband may continue to drop for a spell, but will settle at a level that will preclude challenges from would-be facilities-based competitors. Besides, with the minimum ante to play at that point being voice, data and video — only the deep-pocketed could expect to mount a serious threat.

KHALI HENDERSON

khenderson@vpico.com
 Group Editor

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