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Re-monopolizing telecommunications

August 17, 2005

'tis the summer of discontent in the telecom world, unless, of course, you are an incumbent telco.  If so, the only thing that should rankle you is that daily morning hangover you have from all the partying going on at the office.

Those who aren't so fortunate are left to ponder the question, "How did it come to this?" 

Add US LEC to the growing legion of CLECs, ISPs, consumer groups, and anyone else who values competition in the marketplace, who believe that, given recent FCC regulatory developments and the unveiling of BICCA, all signs point to the re-monopolization of the telecommunications market. 

(That's great news for me.  I've grown tired of innovation, new products, relatively better service and competitive pricing.  I want to pay more for less.)

Yesterday, I interviewed Wanda Montano, US LEC's vice president of regulatory and industry affairs, who said, among other things, the sky really does appear to be falling in the telephony world.

Specifically, Montano said that the Broadband Investment and Consumer Choice Act (BICCA), if passed, would essentially strip all remaining regulations from the "incumbent monopolies [read ILECs]"

"That's right, I said monopolies," Montano added for emphasis.

Once again, it all boils down to the good ol' "last mile," to which the incumbent telcos now have a stranglehold, she said, noting that it is not feasible for CLECs to build into customer premises. 

"It just doesn't make economic sense," she said.  "There is no other option."

Indeed, Montano rattled off the possibilities of obtaining alternative network access from the other broadband players.

BPL - Not worth considering.

Cable operators - "They don't sell their lines, they aren't regulated, they are not required to sell to us," Montano said. "For CLECs, cable is not an option."

Wireless - "There may be some wireless options," Montano said, although she remained skeptical of the technology's future, adding that "wireless hasn't worked yet."  Businesses like the wireline option because of its reliability, she said. 

All of which leaves CLECs between a rock and a cable/telco duopoly.

"How do we get to customers?" an exasperated Montano asked rhetorically. "Spend 100 years building a network?"

The pending mega mergers - SBC/AT&T and Verizon/MCI - will further eliminate competition, providing customers with fewer choices and less innovation.  

CLECs and ISPs aren't the only ones who should be keeping an eye fixed on the developments coming out of Washington, D.C.

VoIP providers, in non-peering situations, utilize CLECs for interconnectivity, Montano said.

"Once those industries start going to the incumbents, they can charge whatever the heck they want to charge," Montano said.  "If we're not here to provide those services, [VoIP providers] are going to be eliminated from the market, too."

You have to admire the incumbents' chutzpah, though.  As if being on top of the world isn't enough, Montano said that there is a new proposal in Texas that would eliminate the reciprocal compensation and inter carrier regime.   a network call must be interconnected with another network, the calling network pays a facilities fee to the connected network. (Got that?) 

So, US LEC would have to pay a fee to Verizon if a call generated from US LEC must be connected to Verizon's network, and, for now, vice versa.

The new Texas proposal would hoist the cost for every call, regardless of where it was generated, entirely on the CLECs shoulders.  [In my next life, I don't want to be a professional baseball player.  I want to be a lobbyist for an ILEC.  It must be a pretty good gig, if you can get it.]

In the end, John and Jane Q. Public will feel the greatest effects of the dwindling choices in the marketplace. History dictates it.  

Montano provided the classic example of how ILECs pursue innovative technology.  "DSL sat on the shelf for 20 years and [Verizon] didn't deploy it," she said.

The silver lining for CLECs, if there is one, is that BICCA won't be passed any time soon because the bill does not address Universal Service Fund issues, Montano said.

Indeed, Universal Service will almost certainly find its way into any telecommunications law that comes out of Congress, considering that Republican Sen. Ted Stevens is the chairman of the Senate Committee on Commerce, Science, and Transportation - the committee that is overseeing the telecom law's update. 

Stevens happens to be the senior senator from Alaska, so he (his constituents) have a vested interest in how resources will be allocated to provide telecom services in rural areas.




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