Speed up your modem Ven, a good read. Remember COVD?
A little-noticed provision in the SBC-Ameritech merger agreement will
change the way Americans access the Internet--and the way telecommunications is regulated.
BY Peter Spiegel
09/20/1999
Forbes
197
Copyright 1999 Forbes Inc.
TELEPHONE CUSTOMERS in 13 states, including California and Texas, are
about to get a gift from the Federal Communications
Commission--deregulation of the business of offering high-speed Internet
access over phone lines.
It's a key provision of the soon-to-be-approved merger of SBC
Communications and Ameritech that's gone almost totally ignored in the
media. And it's giving fits to AT&T, which has spent most of the past
year on a $116 billion spending spree to get residential customers
hooked up to broadband access through cable modems.
Don't order that cable modem just yet. Take a look at DSL--for
"digital subscriber line"--a kind of on-ramp for the Internet that is
about to take off after several years of just sputtering along. (See
related story, p. 198.)
If you take the cable choice (available to a third of U.S.
households), you will spend perhaps $200 for a modem and up to $50 a
month for high-speed Web access. AT&T will be the largest marketer of
cable access, but other cable networks offer the same service. Speed: up
to 2 megabits a second, 35 times as fast as the best modem using
ordinary telephone lines. However, because multiple users share the same
bandwidth, the maximum speed is rarely reached.
For about the same price, for both the modem and the service, you can
get DSL. It's rated at only 1 megabit--20 times as fast as an ordinary
dial-up modem--but you are more likely to hit top speed.
Why even consider DSL? Price. There is reason to believe that it will
soon be available for a good deal less than $50 a month. Here's why.
DSL technology has been around since the early 1990s, but only about
150,000 Americans currently use it. Blame the local providers for that.
Rather than roll out DSL to residential customers, most of the Bells
have focused on more lucrative business services, such as T1 lines,
which go for a monthly charge of $1,000 or more.
That opened the door for small newcomers, such as Santa Clara,
Calif.-based Covad Communications and San Francisco's NorthPoint
Communications, to cherry-pick a few thousand Internet users and sign
them up for DSL services.
But these outfits are captives of the regional Bells, in much the same
way that MCI was a captive of AT&T in its early days. The alternative
DSL companies have to rent everything--from office space near the local
switch to the phone lines themselves--from the Bells, which are also
their primary competitors.
The SBC-Ameritech deal will change all that. Once the merger is
completed, SBC must put all its broadband services into a separate,
unregulated subsidiary. This sub will function just as the upstarts
do--meaning it will have to rent space, lines and maintenance systems
from its parent.
The immediate result should be a drop in prices, since the deal also
requires SBC to lower its access fees to the new subsidiary. But more
important, since it levels the playing field, competition will flourish.
Hurray, says Scott Cleland, a telecommunications analyst with Legg
Mason Precursor Group. "It isn't but every few decades that anybody
offers you any true deregulation," he says. "When they do, you should
take it."
The Bells won't necessarily suffer from a cut in access fees. The data
market is growing explosively, and they will get a piece of it, one way
or another. The voice market has been growing at an annual rate of 4%
to 5% ; data, at 300% .
Despite objections from AT&T, FCC approval of the deal is expected,
since FCC chairman William E. Kennard has been personally pushing for
the concept of deregulated subsidiaries to handle these broadband
services.
Indeed, some analysts predict that setting up a separate broadband
subsidiary could also become a requirement for the still-pending
GTE-Bell Atlantic merger. And if this kind of broadband market spreads,
it could very well mean the start of a truly deregulated
telecommunications industry.
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