Is there any hope for broadband?

Summary:The Baby Bells have already cannibalized their siblings...are consumers next?

COMMENTARY--The Baby Bells have cannibalized their siblings, gorging themselves on bull market-fueled mergers and acquisitions faster than venture capitalists could write ludicrous checks for ludicrous sums of money funding even more ludicrous dot-com business plans.

And it was all legal; all done under the radar, lost in the noise of baby billionaires and $3,000-per-head B2B conferences held in Toledo. And it was done in the spirit of competition and telecom "reform." And we all got screwed in the process.

The 1996 Telecom Reform Act promised to level the playing field, drop prices and jump-start competition for local, wireless and high-speed Internet services. Instead we got a footrace to the feeding trough, and when the feasting was over, the seven "Baby Bells" were four.

In the wake of this consolidation there is only vapor-like competition. Instead we have a pock-marked telecom industry, littered with failed or failing competitors, that is second only to the spectacular financial flameouts whose epitaphs are chiseled into the Chapter 7 tombstones of the dot-com graveyard.

And now a bill in Congress is looking to blow away any facsimile of making the local telephone companies obey the law that mandates they open their networks to any and all competitors in an effort to level the competitive playing field.

This bill, dubiously called the "The Internet Freedom and Broadband Deployment Act of 2001," does nothing more than strip-mine the remaining competitive safeguards of the current law, green-lighting the Bells to bludgeon any remaining competitors into oblivion.

Grab for the Holy Grail
The Telecom Reform Act was sham from jump street but the act's critical voices were drowned out in the din of the lobbying bloodbath being waged between cable and telecom interests who were throwing more cash into congressional coffers than Las Vegas sports books see on Super Bowl Sunday.

The law requires the local monopoly telephone companies to resell their network services to competitors. And when that local network is quantifiably competitive--based on a 14-point checklist written into law--the Bells are granted the Holy Grail of Telecom: entry into Valhalla, er...I mean, the long-distance market.

But the Bells have kept underfinanced competitors tied up in legal battles and fought the 14-point checklist in the courts, spending billions trying to put the regulatory genie back in the bottle.

And along the sidelines of the so-called level playing field lies the carnage of broken promises: By now consumers were supposed to have several local phone companies from which to choose, including residential services offered by long-distance, cable and wireless companies. Many have tried, a few have made lurching advances, but all have failed to make a significant dent in the residential offering of telephone service. As of June 2000, Baby Bell competitors served only 3.2 percent of residence and small business phones.

And remember "video dialtone?" Those promised multibillion-dollar cable-like networks the Bells said they would build to compete with local cable operations? They are all toast.

Finally, while long-distance rates have fallen faster than Madonna's latest single from Billboard Magazine's Hot 100--down 34 percent since Ma Bell was broken up--local telephone rates have RISEN 70.2 percent.

Freaky legislative mojo
That the Bells have been aggressively deploying broadband services at all comes only after nimble but faltering companies like Covad invaded their space and began offering DSL cheaper, faster, whether the Bells liked it or not. And clearly, they did not.

Even as the Bells are currently being fined tens of millions of dollars by the FCC for stonewalling competitors' DSL orders and providing sloppy service to connect those DSL customers to their networks, they realized the writing on the digital wall and began to actively market their own DSL services. But only in those areas where companies like Covad have penetrated.

If this broadband deployment bill is passed, the Bells will be a position to monopolize yet another market: the high-speed data market.

The bill "would be a boon for the Baby Bells but a disaster for consumers," says Mark Cooper, director of research for the Consumer Federation of America.

"The Bells are being rewarded with a bill that will help them maintain their local phone monopolies...and at the same time, establish a new national monopoly--this time in the broadband services market," Cooper says.

If the bill passes, the Bells no longer have to prove their markets are competitive to get into long-distance data services, from which they are currently banned. They'll be able to offer those services immediately, meaning they'll be instant long-haul data competitors to companies such as WorldCom and AT&T, Broadwing and others.

And if that happens, it'll take more than Broadwing's "freaky engineer mojo" to keep the Bells from dominating the field and crushing upstarts.

In addition, rural areas will be bypassed in the broadband land rush; hell, the Bells today loathe having to service the high-cost rural areas with plain old telephone lines.

And when the Bells have little threat of competition, they all too easily fall back into the sloth that made them the plodding monopolies they are today. They have escaped the enthusiasm and entrepreneurial passion that has fueled Internet-based companies, and not by accident, but by choice and design.

The telephone companies hovered below the market "bubble," out of sight, out of mind. Sat there grinning, dammit, waiting for this time, this environment, this Congress.

The broadband bill is being fast-tracked; too few hearings, too quickly for much groundswell of debate. Congress and the deep-pocket telephone company lobbyists writing fat checks are depending on your being asleep at the keyboard, not making much noise.

Shhhh...if you're real quiet you'll be able to hear another DSL provider going belly up and the boys in the Bell boardrooms slapping each other on the back.

Topics: Broadband, AT&T, Legal, Networking

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