Are baby bells abusing their gov't granted right-of-way?

Are baby bells abusing their gov't granted right-of-way?

Summary: Look outside your window (or check the manhole cover down the street).  Not just anyone can hang a wire on that pole or drag one underground -- a wire that eventually connects to your house.

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TOPICS: Verizon
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Look outside your window (or check the manhole cover down the street).  Not just anyone can hang a wire on that pole or drag one underground -- a wire that eventually connects to your house.  The electric company can.   The cable TV company can.  And so can the telephone company -- a.k.a. your local "Baby Bell."  In the old days, with few exceptions (satellite TV being one), these three utilities' access to the pole outside your home or business (known as "right of way") equated to legal monopolies that regulators have tried to manage with creative lawmaking.  For example, those who own the wires may have at some point in time been required to make those wires available to competitors.  If you put a power generating windmill in your backyard and you had power left over at the end of the month, the electric company might be required to buy that surplus back.

But, now, with the cable TV guys into offering telephone service and the electric guys promising high speed Internet access, and who-knows-who-else looking for ways to blast a WiMax signal to your house, the wire owners have been forced to diversify into each others' business.  OK, well, the cable and phone guys won't be delivering kilowatts any time soon.  But, you get the picture.  The competition has intensified, not to mention the pressure that Voice over IP is putting on one of the businesses that almost everybody is into: traditional telephony service.  Feeling the heat, the Baby Bells, who still rely heavily on that business, recently got a get out jail free card whenthe FCC declared Internet Service Provision an "information service" that doesn't trigger the regulation requiring Baby Bells to share their right of way or their wires with Internet Service Providers (ISPs) like Earthlink and AOL.  If those companies were in the business of traditional telephony (as defined by regulation, not as defined by technologies like VoIP), it might have been a different story.  But they're not and the ruling equates to a reprieve for the Baby Bells whose own infrastructures were being used against them by the customers of those ISPs who were using VoIP instead of dial tone telephony. (Have you Skyped recently? I have.)  

If bandwidth was an incredibly precious commodity that wire owners needed to allocate sparingly, then the new regulations come across as being reasonable. After all, even with the government sanctioned right-of-way that their competitors don't have access to, why should the Baby Bells be forced into letting their limited assets get used against them? But according to Bob Frankston, famous for co-inventing the electronic spreadsheet and now looking to fix the many things that are broken with the Internet (a subject for a another blog, or probably a podcast), the Baby Bells' assets are anything but limited and the current "Regulatorium" has produced a situation whereby the Baby Bells are not only able to deny competitors the right of way access they deserve (which in turn would create more competition for our dollars), but are also artificially denying consumers access to the gigabits of bandwidth that's waiting just outside their doors.  Ultimately, this sad state of affairs is holding back the true potential of the Internet, stifling innovation in the process.  By Frankston's calculations, for example, Verizon is reserving 99 percent of its government-ordained right of way (in the form of bandwidth that should be available to us as well as its competitors) for itself so that it may compete in the IPTV market. 

You could take Verizon's side on this.  After all, where Frankston and I live (Massachusetts), for those of us not on a satellite system, the wire that most of us connect our TV sets to belongs to a cable company (Comcast) that also has right of way and that's aggressively competing with Verizon to be both my telephony and internet service provider.  It's only fair that Verizon get to reserve a substantial portion of its government-ordained right-of-way so two can play that game (and Verizon can take on Comcast in the the video on demand business). Right?  But what if Verizon's removal of 99 percent of its bandwidth from its "books" -- a removal that's leaving us with a mere 15 mbps of connectivity when we could have gigabits of it --  is coming at the expense of something more important.  Much more important.  Wrote Frankston  of the FCC decision that cleared the way for Baby Bells to do this:

By treating the Internet as a service rather than fundamental and vital connectivity, we cannot use it as the basis for new services such as medical monitoring and emergency communications......When carriers talk about broadband, they are referring to the fiber technology of which they share only 1%. When the FCC justifies a broadband policy, it classifies anything slightly better than dial up a broadband so it can claim that we are not behind countries offering consumers 100mbps services and above.  As long as the FCC fails to understand the concept of connectivity as fundamental infrastructure, it will act little more than a shield for the carriers.....With 99% of the capacity of these networks off the books, it will take decades to catch up with countries that already provide 100 mbps and even gigabit access to homes.

But, even more important to Frankston was that he heard Verizon President Ivan Seidenberg made a promise -- a promise that he's still hoping will be kept.

Topic: Verizon

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26 comments
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  • Not hardly

    [i]Ultimately, this sad state of affairs is holding back the true potential of the Internet, stifling innovation in the process.[/i]

    Don't be silly -- this isn't holding back the Internet or progress at all. It's just holding back the USA, which appears to be content to continue watching 150 kg. steroid giants slug it out on television. If the Internet can't deliver bigger, badder ballgames what's it good for anyway?

    Besides, it's a threat to national security and the business of the entertainment sector, which after all is the foundation of the US economy. Better off without it.
    Yagotta B. Kidding
  • What are you expecting the government to do?

    The cable and telephone companies have to compete against each other and prevent new entrants into the market.

    I'm expecting a tie; each will provide equivalent services, eventually at similar prices. Once they've assured survival, they can work on the pricing.

    Part of the strategy do is to provide all necessary products. SBC, for instance is selling WiFI at $2 a month, at least in some areas:

    SBC, the nation's largest DSL provider, needs to hang on to its 4.3 million subscribers, while cable companies are trying very hard to lure them away. SBC's plan builds on its subscribers' affinity for wireless -- the company says it daily sells 3,000 Wi-Fi access points (typically for home users setting up a wireless network). In the race against cable broadband, stopping customer churn is key to DSL's growth, and the hotspot access offers DSL customers something they'll never get from cable.

    http://www.business2.com/b2/web/articles/0,17863,726289,00.html

    Given the capital needed and the existing competition, even a new technology like use of electric wires is unlikely to lure in new competitors.


    Given this likely scenario, how can government interfere?
    True, it can tip the scales toward telephone or cable companies.
    But they've already given up on artificial encouragement to competition. That was awkward anyway.

    Because the range of services which have to be offered quickly by the budding duopoly is so large, the quality of any given service will probably suffer.
    But do you want the government setting standards for services?

    The outcome has been largely decided for some time now. Can the government change what the companies are doing? Should they want to?
    Anton Philidor
  • The telcos are like HIV patients

    Their days are numbered, but they don't appear sick yet. With enough money spent, both can avoid the desease - for awhile. Eventually even Magic Johnson will succumb to AIDS - as telocs will succumb to VoIP.

    Cable companies have nice advanced packet-switched networks, while telcos have circuit-switched. Changing addresses on cable is done automatically via software, changing addresses on POTS requires phone workers to manually string wires. Telcos have a BIG disadvantage when it comes to providing low-cost service.

    In the end it won't matter though. While cable is killing the telcos with VoIP, the WiMAX steamroller is poised to kill both of them AND cell phone telcos. Wireless (and NOT cell) is the way to go in the future, and ANYONE that relys on wires (save the power companies) will become and empty shell. Couldn't have happened to a nicer bunch of guys! Um, YES it could . . . ;)
    Roger Ramjet
    • Telcos can offer VOIP

      My ISP is a telco. If I go VOIP they still get cash from me. Also since my Telco is offering Cable TV channels they can compete for my dollars there too. This isn't the death of the Telco though they are crying about having to compete.
      voska
    • Who's backing WiMax...

      ... aside from Intel, which is not in the business? I've seen speculation about Rupert Murdoch, but that seems unlikely.

      Implementing WiMax is expensive. Only about $125 million will be spent on equipment this year, though growth from somewhere is predicted.

      Some company or group of companies with a lot of money would have to believe in your scenario and invest substantial money. They'd also have to outdo both telephone and cable politically. And they'd have to compete with established vendors for each customer. And they'd have to overcome rights purchases by the established companies intended to block them.

      Are you sure you want to believe?
      Anton Philidor
      • WiMAX backers

        I know that Cisco is very interested in WiMAX. The slow, plodding IEEE committee is taking just a BIT too long in approving the standard. Not many people will invest in a technology that is still not "complete".

        I've said before that WiMAX may NOT be the winner in the long range broadband segment. WiMEDIA and others are nipping at WiMAX's tails and COULD become the pre-eminent technologies a la VHS/Betamax. Technology moves fast, and WAITING for something means that you are falling behind . . .
        Roger Ramjet
  • Forcing sharing could stifle the growth of the internet

    Assuming that the telecos has to share whatever uses their right of way with competitors, what would their incentive be in putting the costly fiber to the home?

    One could easily argue that forcing them to share stifles the internet's potential by removing telecos economic incentive to upgrade the infrastructure.
    __howard__
    • Don't see that

      If I were a Telco and I had share line I put in then I'd pass the cost of putting lines in to the consumer. Suddenly getting a DSL connection would have $800 installation fee. I know the consumer wouldn't like that and what I do then is have the fee waved for signing for a 3 year contract.

      The incentive is there. Maybe not a good a deal as they have now but there is profit to be made.
      voska
      • You might not see it, but the telecos do ...

        You might not see it, but history bears out that the telecos do. They do not want to put in the fiber to the home only to to turn around and share it with their competitors.
        __howard__
        • Fiber to the Home

          Sorry unless the goverment mandates it or pays for it I can't see the baby bells doing fiber to the home.. Verizon has done it in a few places granted but for the majority as long as it works and no one is able to really compete in some areas fiber is still WAY too expensive to run to the home for the majority. Also why invest that money wires still work and they are still getting paid
          beartp
          • Pop your bubble

            Verizon is put in fibre to tens of thousands of homes in a number of states. The cost to put in a line to a home is not as costly as one thinks. The main fibre trunks are getting installed now and it does not take that must time or cost to connect it to the home. The prices being changed for the fibre is equal or better than DSL or cable. They woudl be doing the massive install if they could not provide a cost effective product and make a profit.
            Codyg2003
        • Yes the Telcos ARE stringing Fiber to the home

          I retired just before this started but I know that my whole garage where I use to work has been to school for stringing fiber to the side of the house. This is the telcos future and they know it. What a lot of people don`t realize is that most of the phone lines today are delivered on fiber to crossboxes and only the last mile is copper. What the phone companies want to do is get rid of that copper because it`s so expensive .It`s much cheaper to have a fiber to the side of the house and do all the programing from a remote area than string a new coper wire everytime there is a change at that paticular home.
          OldTimer1
          • Fiber to teh home is coming ...

            Yes, the telecos are trying to get fiber to the home ... and progress if much faster where they aren't being mandated to share it.

            Having to upgrade your competitor's capabilites never makes economic sense.
            __howard__
        • FTTH

          [i]You might not see it, but history bears out that the telecos do. They do not want to put in the fiber to the home only to to turn around and share it with their competitors.[/i]

          More to the point, they don't want to pull fiber to the home, period. They have quite competent market analysts who know that the home user is only willing to pay so much, which is about where cable and DSL are priced today.

          If they pull fiber to the home, the home user won't be willing to pay more so there's no point in building it. If there was any way that some third party could threaten them with loss of business if they didn't improve service, that would be different. Fortunately for them, the FCC exists to prevent any such thing from happening.
          Yagotta B. Kidding
  • Over a long timeq

    I am not sure why the FCC ruled as they did but I must say as a former Ma Bell employee it is very disconcerting. The infastructure the bells are no longer required to share at a rate was built by the bells under a government granted monopoly complete with a guarantee rate of return. That was really our money thru the government to the bells in form of credits and tax cuts. Now our infastructure is being used not for competiton but strictly for a dying giant that can not bring itself to compete on a level playing field. Once the bells split it was long at all until the baby bells starting to recombine like the creature in the terminator. They now are only a few steps away from being back to where they were before. If Judge Green were alive today he would be spinning. Take another look FCC. YOU ARE DEAD wrong on this one.!!!!1
    rickyb9
  • Eminent Domain

    After recent rulings regarding eminent domain, maybe this can be an opportunity for cities to seize the infrastructure and then outsource the maintenance to the baby bells and the cable companies. Of course, this would be done in the interest of creating tax revenue streams.

    Everyone competitor would get a fair shake.

    In the USA corporate interests mean more than the public good, that is why we are now 11th in the world regarding our access to broadband. Look to South Korea. They are light years ahead of us and they deliver the service for cheaper and have more bandwidth than we have.
    Zippy999
    • Municipal Networks

      That's an interesting idea. Many municipals are deciding to build their own networks today. When communities build their own public networks, we sometimes see the local cable company sell their network to the city. It's hard for a cable or telco company to compete with someone who has a bottomless pit of money at below market rates, free right of way...etc, not to mention competing with the same city who taxes them and determines where they can build their networks. BUT, does it make sense for a municipal who is determined to get into the networking business, to buy out a local provider. The only reasons would be to instantly acquire a customer base or if that company is already using a technology compatible with one they want to implement. Most times, municipals should probably just build their own networks...but if they do, they need to understand that technology is moving so fast, they have to keep up....as they may be the only game in town after the private companies exit the market. Otherwise we may look back fondly at being 13th in the world in broadband connectivity.
      Opticat
      • "Municipality", not "Municipal"

        Opticat, I hate to be the "language police" here, but the word "municipal" is an adjective, and you used it (or a pseudo-plural form of it) no less than three times as a noun. I think the word you want is "municipality" rather than "municipal(s)."

        That said, it is a profoundly BAD idea to let any local government get in the business of providing internet services, be they WiMax, WiFi, copper, or fiber.

        Remember, these are the same people who can't even be relied upon to fill the potholes to keep the streets passable. What makes you think they could be anything but dreadful as an ISP?

        And, since they would have a vested interest in trying to succeed, and the power to make the laws that would give them an advantage, they would no doubt stifle any and all competitors. As a result they could keep their prices fixed higher than necessary. (It's just another taxation revenue stream to them.)

        Its just doesn't seem like a very good deal for the masses to rely upon their municipalities for Internet service. Free market forces are ultimately the best course here.

        --Rog--
        RogerBremer
    • Error

      [i]In the USA corporate interests mean more than the public good, that is why we are now 11th in the world regarding our access to broadband.[/i]

      Thirteenth and falling. Your numbers are out of date.
      Yagotta B. Kidding
  • Interesting but wrong

    The Telcos have very limited bandwidth compared to the cable guys. Cable was deregulated in the 80's and so they made massive investments in their infrastructure then. VOIP is unregulated. WIMAX is unregulated. Cellular is for the most part unregulated. The traditional Telcos are still regulated as to terms, prices, service levels and all conditions of sale. They can't lower their prices to compete and until the FCC's long belated decision earlier this year, were required to resell their lines to competitors at prices underneath their costs. This was an attempt to jump start competition by asking one company to subsidize it's competitors. Worse yet, the prices were so low that it was a disincentive for telco competitors to invest in their own infrastructures. This means that since 1996 while the cable guys were investing...the telcos were just losing customers. This is what really puts the telcos in jeopardy. If they can't get freedom from their regulatory environment, they won't be around to even be an option in the future.
    Opticat