Senator Ensign Telecom Bill

Here are some links to the new telecom bill:

Senator Ensign Telecom Bill

Senator Ensign Telecom Bill Talking Points

I haven’t had a chance to digest it fully but so far the important points of this bill are that it protects VoIP calls. It claims to help the market by taking away arbitrary and historical regulations that arbitrarily hamstring one competitive technology over another.

It says its goal is to encourage all companies to invest and compete vigorously to deliver innovative, quality services to consumers.

It claims it may bring $634 billion in GDP growth and 212,000 jobs in five years.

I like the idea of having more competition and less regulation. My concern is that we have cable lines and phone lines built over the decades from a monopoly position in the market. These lines have always been regulated to some degree and since 1996 have been shared with others at low rates.

Now these companies don’t have to share their lines if they don’t want. Sure cable and phone companies will be competing vigorously. One day we may see widespread deployment of BPL and WiMAX as well. My concern is for the small company that wants to provide internet services via DSL at better rates by providing better service. It is a given that LECs and cable companies have poor service and are slow to install lines for customers.

The best analogy I can think of to the current state of the telecom market is the airline market where American and Delta as entrenched monopoly carriers were used to resting on their laurels. Their service wasn’t great. They didn’t really have to do anything to make a living.

Once new carriers came into the market the airline world was turned upside down. Consumers have more choices and are happier when they fly. It took brand new companies with brand new models to change this market.

The point is that it is easier to launch an airline than it is to drag copper or fiber to every curb or home in the nation. How will the upstart internet companies that can really shake up the market come to be?

Sure, VoIP is one answer and certainly Vonage is doing a bang-up job competing with cable companies and LECs. But cable and phone companies have the ability to bundle services because they own the lines. They can bundle at such low prices that VoIP providers are squeezed out.

They are using lines that were built via monopoly businesses to compete in a new world of Internet service. I reiterate that this bill isn’t fair to small ISPs and CLECs who want to provide competitive DSL rates and better service levels.

Lines that were built by government sanctioned monopolies should be shared. Giving these lines back to companies is unfair to the competitive landscape and consumers. The Telecom Act of 1996 addressed these issues and they are now being swept under the rug. This causes me great concern.

Please also see: U.S. Sen. John Ensign Releases Telecom Act Rewrite

As a matter of disclosure, I am a shareholder in a cable company, a CLEC and a number of other telecommunications companies.

  • VoIP Blog - VoIP News, Gadgets
    July 27, 2005 at 1:47 pm

    New Telecom Bill

    Rich Tehrani has an interesting take on pending telecom legislation that will affect broadband data and VoIP competition. Rich does a quick overview of the Senate legislation and includes PDFs of them as well. Check it out…

  • Rick Rappe
    July 27, 2005 at 3:39 pm

    Rich,
    You had me until the comment that government sanctioned monopolies’ lines should be shared. That’s a tough one to agree to, even as one who isn’t a fan of the legacy LECs. Yes, they were built as government sanctioned monopolies, but they also had their profit levels capped and the highest profit I ever recall a State Public Utility Commission authorized was 14% AND in return for the monopoly status, the LEC also was required to serve everyone regardless of cost and that no customer would be charged more than any other. So while an apartment building for example might be very economical to wire up in return for many customers, suburbs and farms are not. Basically urban telephony subsidizes rural telephony. As competitors cherry pick the higher revenue business, the telco is left as carrier of last resort and those without cherry account status (most of us) pay more while the gravy business and lower prices and/or better service rendered to these cherry accounts is subsidized by the rest of us.
    What it comes down to is the LEC was forced to share with CLECs, ISPs and others at low margin so that the sharer can take their best customers away. I’d be reluctant to lend my car to the fellow running away with my wife too.
    Certainly it has been true that the entrenched LECs were and are slow to innovate, but a major reason was the snail’s pace it took to get PUC approval to offer anything new, and this carrier of last resort problem further hamstrings the telco. Thus the only way your suggestion can be fair is if the CLEC, ISP, CATV company or VOIP provider were to pay a fair share of costs. When the telcos complain about unfairness, they aren’t just being whiny. They actually have a pretty good point.

  • Rich Tehrani
    July 27, 2005 at 3:55 pm

    Very good point. Of course it seems like this is water under the bridge at this point I wonder if the telecom act would have been more successful if CLECs were forced to give some equity in their companies to the LECs. Would this have encouraged LECs to make sure CLECs were successful? Would this have changed the game?
    I think this is similar in a way to Delta launching Song Airlines. I am not an expert on the profitability of one versus the other but sometimes putting resources into a brand new company is the best way to innovate. Life’s further questions can be answered here: http://voip-blog.tmcnet.com/blog/rich-tehrani/voip/lifes-questions.html.

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