Back to Zero

Posted: 11/1999

Back to Zero
By Ernie Kelly

Don’t look now, but they are at it again. The incumbent local exchange carriers (ILECs)
have rounded up their supporters in Washington for one final charge up Capitol Hill in a
last-ditch effort to perpetuate their market dominance. Having failed to stem the tide of
competition through a variety of legal, regulatory, operational and political efforts, and
having failed to convince state and/or federal regulators over the past three years that
half-baked efforts to open up their networks should qualify them for interLATA (local
access and transport area) relief under Section 271 of the Telecommunications Act of 1996,
the regional Bell operating companies (RBOCs) and GTE Corp., Stamford, Conn., have come
full circle and now are desperately seeking legislative relief.

An enormous amount of RBOC/GTE shareholder money now is pouring into an effort to
rewrite the Telecom Act in a way that would advantage the incumbents and disadvantage
competitors. Proponents of the legislation have lined up big-name lobbyists and Washington
political insiders to push a broad-based legislative and public relations battle to get
the bill passed. It is almost exclusively an inside-the-beltway battle, but its
ramifications easily could affect every company trying to do business in the
telecommunications markets of the future.

The effort to free the RBOCs has begun in both the Senate and the House. In the Senate
the principal proponents are Sens. Sam Brownback (R-Kan.) and John McCain (R-Ariz.).
However, the most forceful leadership on behalf of the incumbents has come in the House of
Representatives from Rep. W. J. "Billy" Tauzin (R-La.), who currently is the
chairman of the Subcommittee on Telecommunications. His primary goal since the onset of
summer has been to aggressively round up co-sponsors for a bill he has introduced.

Tauzin’s bill, The Internet Freedom and Broadband Deployment Act of 1999, would free
the RBOCs to offer interLATA services–so long as they are "broadband"
services–upon passage. But the Telecom Act is only three years old, you say? Why not give
it time to work, you say? We waited 62 years the last time we rewrote the act.

The reasoning behind the need to update the freshly minted law goes like this: When
Congress passed the Telecom Act they forgot to differentiate between plain old
telephone service (POTS) and new digital services. Obviously, no one in their right mind
would want to inhibit the ILECs from providing these much-needed services. So to right
this oversight, we must clarify the act by making sure the provisions restricting
RBOC provision of interLATA services do not extend to high-speed data and Internet access.
Just a minor, little technical change, if you will.

The scope of this perfidy is found in another provision in the bill, which specifically
removes the resale and unbundling obligations of Section 251 for high-speed data services.
So, through this bill, not only do the RBOCs get their de facto 271 authority to offer
interLATA service, but also they no longer have to unbundle and resell anything they wish
to call or claim is "a high-speed data or Internet access service." How sweet it
is!

Of course, voice services already are, and increasingly will be, offered over broadband
facilities. So, what’s to keep the Bells from doing that, essentially bypassing the
requirements of Section 271 to open their networks to competition to enter all interLATA
telecommunications markets, including voice? Well, there is an additional provision added
saying they can’t do that.

Now doesn’t that make you feel comfortable? Everyone knows that there is no practical
way to detect when voice streams are digitized. To enforce this, the Federal
Communications Commission (FCC) would have another huge definition problem–somewhat akin,
I imagine, to their efforts to define pornography in previous decades–and would have to
have investigative capabilities along the lines of the Federal Bureau of Investigation as
it operated under J. Edgar Hoover. So, we just have to trust the RBOCs to obey the law.

The central purpose of the Telecom Act was to require the incumbents to open their
networks to local competition. But after only three years, momentum is gathering for
legislation that would wipe out the gains we have made by removing the great carrot of 271
authority from the act.

If the bill begins to move, it ultimately will become a huge, nasty public battle. That
will align Tauzin’s supporters with a familiar affiliation (albeit with shrinking numbers)
of telecom monopolists from the RBOC/ILEC camp, against competitive industry foes that are
increasing, rather than diminishing, in political strength. Five years ago, those
corporations matched off against the RBOCs in this debate were a small collection of long
distance carriers and a few industry hangers-on. Today, the list of companies that would
be disadvantaged by the pro-incumbent bill also would include hundreds of competitive LECs
(CLECs) formed since 1996, thousands of Internet service providers (ISPs) and advanced
telecommunications service pro-viders, electric utilities, wireless providers, cable
companies and every other company that provides products and services to the emerging
competitive local service community.

Of course, the public relations campaign behind Tauzin’s bill is a marvel to behold. It
wraps the whole proposal in the American flag with a theme that revolves around the
promise of the Internet for residential customers and rural Americans. The RBOCs claim
they are best positioned to bring the fruits of Internet access to millions of Americans,
but are handcuffed by a law that didn’t even contemplate the digital revolution now upon
us. "Competition is working for everyone except us," one RBOC spokesman was
quoted as saying.

Has anybody checked their stock prices since the passage of the act? Has anyone looked
at their revenues or bottom lines over the past three years? There is no way you can argue
that they have been disadvantaged over the years since the passage of the act. On the
other hand, competitors trying to deal with them have been plenty disadvantaged.

Then there is the pure political drivel that only RBOCs care about those Americans who
the Internet revolution has passed by. This is a particularly irritating argument coming
from companies that, over the years, have sold off rural exchange after rural exchange to
cleanse their portfolio of less profitable properties.

Another totally specious argument is the notion put forth by the RBOCs that without
relief they are not going to invest in the "off-ramps and on-ramps" necessary to
complete the digital telecommunications highway. This is an absurd suggestion. Carriers
everywhere recognize that all communications eventually will be transmitted over digital
facilities. Everyone is frantically building out, upgrading and extending their digital
capabilities, including all of the incumbents.

Finally, the notion that Congress did not know about the difference between broadband
and POTS services when the act was passed is equally absurd. Of course they understood.
That is specifically why the prohibitions in the act refer to "telecommunications
services." They meant to cover all services, which is precisely what the law does. If
the RBOCs had any confidence they could win such an argument in the courts, they would
have done so by now. Ergo, the only way to get such an interpretation is by changing the
law itself.

In a sense it seems as if we are back in 1995 again. Both sides are lining up war
chests and big-name supporters. A whole lot of money is going to be spent by incumbents
and competitors that could otherwise be invested in these new networks or returned to
their shareholders as dividends.

I have seen a lot of effort with varying degrees of success from the RBOCs to open up
their networks. We are making progress. Why don’t they just do what the act asks them to
do and finish meeting the checklist criteria? It is not, as they claim, a moving target.
Today it is being spelled out in necessary detail in states such as New York (where, at
press time, Bell Atlantic Corp. had refiled with the FCC for long distance entry) and
Texas.

RBOC employees are talented and capable of doing what is required by the act. Instead,
we continue to see the RBOCs try to eat their cake and have it, too. If they had earnestly
followed the prescripts of the act from the get-go, they would be in any interLATA market
they wanted to be in by now. Why does this continue? Because the lawyers and lobbyists are
still running these companies. To me, there is simply no other explanation.

Ernest B. Kelly III is president of the Telecommunications Resellers Association (TRA), the Washington-based trade organization representing resellers of telecommunications services. He can be reached by phone at +1 202 835 9898.