Tue, Sep 04, 2001 page19

• US House targets Internet access and competition

  The question posed by a new bill is whether local telephone carriers should have sole control of Internet access over phonelines, or whether competing companies should also be allowed to use the connections

  • By Seth Schiesel / NY TIMES NEWS SERVICE
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  Shortly after Congress reconvenes today, the House will take up a complex bill that raises two simple, essential questions about the nation's digital future.

  In the effort to deliver high-speed Internet service to consumers, what is the ideal number of competitors? And should the government make that decision?

  In recent years, the battle for high-speed, or broadband, access has been dominated by two technologies. One is digital subscriber lines, or DSL, which use telephone lines. The other is cable modems, which use cable television lines. Despite the development of satellite and land-based wireless systems, the broadband media world will continue to be ruled by phone and cable lines for many years.

  Cable lines are essentially under the sole control of the cable companies that own them, companies such as AT&T and AOL Time Warner.

  The question posed by the House bill is whether the Bell local telephone carriers, companies like SBC and Verizon, should essentially have sole control of Internet access over phone lines, or whether competing companies should also have a fighting chance to use those local connections.T

  he bill appears to have a reasonable chance of passage in the House but strong opposition in the Senate.

  If the bill became law, it would be difficult for competitors to build a sustainable business delivering high-speed Internet service to consumers over telephone networks. Congress would basically have determined that the consumer broadband market should be a competitive duopoly of cable operators and the Bell companies, with a small role played by satellite providers.

  If the House bill fails, on the other hand, the Bell companies will continue to be obliged to share many parts of their networks with outside companies. Because cable companies are generally under no such obligations, the Bell companies will continue to face costs and regulatory hurdles that cable providers do not.

  The issue is really that simple: Should the nation's broadband future be determined by a fight between two big combatants or by a messy battle among many potential competitors?

  The bill in question is known as Tauzin-Dingell, for its two principal sponsors, Representatives Republican Billy Tauzin, Louisiana., chairman of the Energy and Commerce Committee, and John D. Dingell of Michigan, the committee's ranking Democrat, both longtime supporters of the Bell companies' aspirations. In pressing for the bill, the Bells have adopted a time-honored technique: Try to convince Congress that there is a problem and then convince Congress that the bill will solve it.

  But neither assertion is quite true.

  The foundation of the Bells' case is that broadband Internet access is not being introduced quickly enough and that what they describe as the slow pace of broadband deployment is hurting the economy.

  In a speech two weeks ago in Aspen, Colorado, before the Progress and Freedom Foundation, Thomas J. Tauke, Verizon's senior vice president for public policy and external affairs, cited the growth of a number of new communications services, including the Net.

  "Trouble is, the rate of adoption of these technologies has slowed dramatically, along with the growth of the economy itself," he said. "So what's flattened the slope of the curve in 2001. The answer is the lack of widespread deployment of broadband technology."

  "At the very moment when the US economy is mired in a high-tech slump, broadband is still in the `beta' phase."

  But in fact, broadband is already beyond the beta, or test, stage. By the end of this year, about 17 percent of the nation's Internet-linked homes, or more than 10 million homes over all, will be using broadband, according to analysts. That figure would be up from close to zero just four years ago.

  The Bell companies argue that this is slow growth. But listen to what Bell executives have to say about the pace of competition in the local telephone market, which was opened to outsiders five years ago.

  "The FCC says that nationwide, competitors have taken about 8 percent of the lines," F. Duane Ackerman, BellSouth's chairman, said in an interview last week, referring to the Federal Communications Commission. "It's moving along at a very rapid clip."

  Can 17 percent penetration of broadband be slow if 8 percent penetration of local phone competition over a comparable period is rapid?

  It is hard to detect a crisis in broadband deployment. Verizon itself says that almost half of its roughly 60 million lines are capable of carrying DSL and that it plans to invest US$4.7 billion this year alone in high-speed data services.

  The real crisis for the Bell companies appears to be that they are lagging behind the cable operators in winning broadband customers. By the end of the year, cable operators will have about 7 million broadband customers, compared with about 3.3 million DSL subscribers, according to the Yankee Group, a technology industry research firm in Boston.

  It is true that under current law the cable companies do not have to open their networks to competitors, while the Bell companies do. But that is not the reason for the disparity in cable broadband and DSL subscriptions.

  To begin with, the big cable companies took a lead of at least two years in widely adding Internet broadband technology to their systems. Moreover, for some arcane technical reasons, cable modems by most accounts are a superior product, faster and far more reliable than DSL for most homes.

  The technical gulf is clear, and some Bell executives acknowledge it. Those disparities are why the Bell companies want to extend optical fiber deeper into their networks, closer to the customers' homes, in hopes of approaching technical parity with the cable operators.

  One of the central provisions of the Telecommunications Act of 1996 was that the Bell companies must sell direct access to parts of their networks to other companies. The core of the Tauzin-Dingell bill essentially says that as the Bell carriers extend optical fiber into their networks, other companies will not have the right to buy direct access to those new Bell lines. For many if not most outside DSL companies, losing that ability would be tantamount to being put out of business. (Even under the current rules, there are DSL companies are going out of business nearly every week.)

  The Bell companies argue that if they make investments to improve their networks, they should not have to sell direct access to the new parts of those networks to outsiders.

  Many people in Washington see some merit in that argument. In the late 1990s, the FCC agreed to exempt SBC and Verizon from requirement to open their new data networks, as long as those companies placed their data operations in separate subsidiaries.

  That arrangement, however, was overturned by a federal court last winter. So now, with the Tauzin-Dingell bill, the Bells are trying to win an exemption that is far broader than the FCC had granted, and without the need to set up subsidiaries.

  Passing the Tauzin-Dingell bill would change the nation's digital landscape. In the name of embracing market forces, Congress would be determining the design.
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