I -just- today ordered "naked" DSL service (no dialtone/phoneline
required) for my new apartment in San Francisco, from the ISP
Speakeasy, for $55/month. add Vonage for $15/month VoIP service and
I'll probably squeak in around $75/month for something SBC would sell
for over $100/month (plus all those mysterious universal service fees
that don't actually go to universal service, and other taxes and fees)
i'm pretty sure that i don't ever want to do business with an
incumbent telco again (i'll use Vonage over the DSL for voice), but i
wonder how much more its going to cost when SBC can start price-
gouging all the independent DSL resellers who now are captive to its
last mile infrastructure, having been lured in by the guarantees of
the '96 telecom act (which the FCC just blew away)
-------
http://www.pbs.org/cringely/pulpit/pulpit20050811.html
August 11, 2005
The Gloves Come Off
Thanks to the Supreme Court and the FCC, U.S. Telcos Are About to
Reinvent Their DSL Businesses
By Robert X. Cringely
Last week, the U.S. Federal Communications Commission again bowed to
the interests of the big telephone companies, and ruled that those
telcos have no obligation to provide other Internet Service Providers
wholesale access to their DSL networks. While this might look like a
death knell for Earthlink DSL, for example, and vindication for AOL's
and MSN's decisions to drop their own DSL businesses, that isn't
necessarily the case. What IS the case, however, is that the decision
has as much to do with telephone service as broadband, and the telcos
are positively gleeful. Whether we consumers should be gleeful, too,
isn't yet clear, but the answer right now is, "Probably not."
Let's first look at the decision. The short version is that the FCC,
seeing enough incumbent and emerging broadband alternatives to DSL
(cable modems, power line, WiMax, and 3G cellular data) no longer
felt that alternate ISPs had to be guaranteed access to the local
phone company's DSL plant. The ruling didn't look at the DSL
infrastructure, itself, other than to place it in this broader
network and legal context and say there seems to be plenty of
competition now.
Not in my town there isn't. Here in Charleston, SC, my choices are
BellSouth DSL which, as my 81 year-old mother put it, "sucks" (the
first time I ever heard her use that term), or a Comcast cable modem,
which is faster but brainless in that Comcast hasn't done a very good
job of provisioning Domain Name Service. Power line, WiMax, and 3G
cellular are nowhere to be seen in my neighborhood, and so far aren't
even on the drawing board, either (I checked).
But through the Beltway glasses of the FCC, the nation apparently
looks awash in broadband alternatives, so they gave the poor
telephone companies this sorely-needed relief.
Here's where I get really confused.
It seems to me that the telcos got their relief a year ago when the
FCC -- in an earlier decision -- concluded that the companies didn't
have to share their next-generation networks with third-party ISPs.
Fiber-to-the-home, fiber-to-the-curb, fiber-to-the-neighborhood, and
even certain copper services like ADSL2 and 2+ were exempt from
required sharing, leaving plain old original ADSL the only network
they were required to share. The idea last year was that telcos
wouldn't invest in these new networks at all if they had to share
them, so the FCC said they didn't have to, with the goal that we'd
all then get faster service. This, of course, completely ignored the
existence of the same cable, power line, WiMax and 3G cellular
infrastructures that today -- only months later -- are justifying the
current decision.
So the telcos were first exempted from having to share their faster
services in order to encourage them to build those services, which we
sorely needed. And now they are exempted from having to share their
slower service specifically because there are so many broadband
alternatives.
Huh?
Remember, "share" means "sell" or "rent" to the third-party ISPs for
rates that are higher than I expected, and a lot higher than the
telcos suggested. For all the talk of having to sell "at cost," those
agreements are profitable for the telcos, and we'll see that proved
next year when the agreements are generally renewed. You see, this
new FCC decision didn't prohibit telcos from reselling DSL, it just
made doing so optional.
One thing that's very true is the phone companies WILL shortly begin
a frenzy of broadband improvements, but my belief is that this isn't
based on the logic stated to be at the basis of either of the two
enabling FCC decisions. It's based, instead, on the implicit result
of these two decisions, which is a fundamental change in the way
telcos are regulated.
The basis of utility regulation is that for the privilege of being
allowed to have a monopoly, utilities have to accept obligations in
the form of reasonable profits and additional public services. These
privileges and obligations are supposed to balance each other. But
what happens if you take away the obligations, as the FCC appears to
be consistently doing? Then all that's left is privilege.
What's happening here is the telephone companies are getting parity
with the cable TV companies. Last year, the FCC reclassified cable
modems from being common carrier services -- that is, COMMUNICATION
services -- to being INFORMATION services. The distinction here is
critical, because a communication service is regulated while an
information service is not. A communication service is like a phone
company or a cable TV company, while an information service is like a
Yahoo or a Google -- except, of course, Yahoo and Google don't own
any wires. The cable decision was tested recently in the U.S. Supreme
Court and upheld, with the ultimate result being this DSL decision.
And here are the two most important bits of both decisions: 1) the
cable and telephone companies now have an effective broadband
oligarchy that is pretty much without regulation, and 2) any
additional services that are encapsulated within the now deregulated
ISPs will be, themselves, deregulated. Initially, this will mean
phone service, but eventually it will mean EVERYTHING.
So here's the new landscape of DSL as it is about to be rolled-out by
my local phone company, BellSouth. I am sure similar initiatives are
happening at your phone company, too.
At BellSouth, I'm told, DSL will shortly become the core service. The
company will begin rolling-out 6 megabit-per-second service, followed
later by 24 megabit-per-second service. The former is possible under
the current ADSL spec, though only within a short distance from the
telephone company DSLAM where DSL signals begin their journey. My
friend Stephen in San Francisco lived perhaps 100 meters from the
DSLAM and consistently saw 8 megabit-per-second speeds even though he
was only paying for 1.5 megabits. But given the poor quality of phone
lines here in Charleston, I'm guessing even the six megabit service
will be ADSL2.
ADSL2, which the ITU calls G.992.3, uses the existing copper
infrastructure in a smarter way. It offers slightly faster speeds --
up to 8 megabits-per-second -- but more importantly it has greater
range, supports true ATM Quality of Service, uses less power, and has
significant self-diagnostic and bandwidth optimization capabilities.
Remember, this is one of the technologies the telephone companies
said they couldn't afford to install if the FCC didn't get the third-
party ISP's off their backs. Yet the bottom line for ADSL2 is simple:
It costs no more to build and costs less to run, leading to
significant overall cost savings for the telco. ADSL2 will run over
lines that wouldn't work for original ADSL, it will run further over
lines of any type, and the diagnostics mean fewer truck rolls, which
cost real money.
This is a service the phone companies had to essentially be bribed to
provide, yet it is clear they would have built it anyway. And that
bribe came not just in the form of eliminating mandatory wholesaling,
but ADSL2 and everything carried by it is pretty much unregulated.
So BellSouth, for example, will roll out ADSL2 and throw its own VoIP
phone service on top. But instead of fighting with the state utility
commissions about rates and taxes, this new VoIP service will be as
unfettered as a Vonage or a Skype. As a result, BellSouth will be
able to offer very competitive VoIP rates and still make more money
than a Vonage, and in fact, more money than they made with the
previous regulated phone service, which will quickly die.
There's a push and a pull here. Buy ADSL2 and get cheap phone
service. Want cheap phone service? Buy ADSL2.
Then comes ADSL2+ (G.992.5), a four-wire service running at up to 24
megabits-per-second, most of which will be used for (again
unregulated) video. Those who think Internet cable TV is too
expensive are caught up in the idea of the phone company having to
use their Internet backbone connections for any of this, which they
won't. They'll get TV signals the same way the cable companies do --
by satellite. But the available LOCAL bandwidth of a DSL plant is so
much larger than any digital cable system (up to 1,000 lines per
seven-foot rack, all running at up to 24 megabits-per-second) that
the phone companies will right from the beginning be selling value-
added services like Digital Video Recording, except the DVR will be
at the phone company, not at your house.
This is why the cable TV companies are all ramping-up their Internet
bandwidth. For the moment, they still have an advantage, but in
another year or two that will be lost, so they are trying to bulk-up
now, hoping customers will later be too lazy to switch.
The ultimate result of all this FCC rule-making is that the big get
bigger, and the small learn to adapt or they die. There is a quid pro
quo of sorts, and that's the conversion of regulation from governing
rates to mainly governing emergency services. It looks like beyond
e911 and supporting digital wire taps, the feds don't really care
what the cable TV and telephone companies do or what they charge. And
many of the telephony services currently subsidized by carrier fees
will probably die or be pushed off on the states as a result of this
effective telco tax cut.
And maybe that's good. Maybe a thousand flowers will bloom.
Or not.
But for sure, the logic used to support all these decisions is,
itself, bogus.
---
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