Bill,
That was a good, provocative reply, thanks.
I'm in partial agreement with you on certain matters relating to the ILECs propensities for regulatory maneuvering and lethargy. But I cant agree with your assessments of technology and the lack of its value and significance in determining the balance of powers in this puzzle. Nor do I fully agree with the strategies being employed by incumbents, connundra notwithstanding, nor those which you espouse, as they relate to
the copper loop and the serving area access market, in general.
The local access sector is undergoing radical changes, at the same time that applications are also undergoing changes on the desktop and other appliances. The changes in the loop sector are not only from the demarcation point of the user to the CO, but also in the strategic ways that access technologies support, inter-depend and interact with other networking constructs throughout the larger network, during the fulfillment of all telecommunications services. Where you speak of a connection, characterized as a physical entity to the subscriber, the major theme of my reply here consists of:
(1) there are actually several different layers of connections, perhaps several different logical connections simultaneously, now to contend with, which can be viewed in a similar way as we regard the lower layers of the OSI Reference Model; and,
(2) competition is in a rapid ascent, and the form of that competition is not only from other purveyors of local access, but from the enabling characteristics of the IP types of services now possible, as well.
In a sense, the competition is from both outside the telcos and within when IP is supported, in the first place.
I'll go out of sequence a bit, and start with the points on which we agree, first.
You say:
>>If they could offer it themselves in scale to their base they could add value to their loops and compete with CLECS. Unfortunately, they haven't come to that same conclusion and prefer to slug it out in court over long distance.<<
This is true. But I feel that it stems from decades of never having to move quickly, like many other aspects of society up through the ages, but as the third wave has struck the ILECs don't know how to respond, even if, or even though, they may actually want to. Also, given what I have to say below, the LD matter, at least as it applies to the domestic markets, may be a Pyrrhic victory, at best. Read on.
Depending on your definition of the term "customer connection," I may disagree with you on the following point:
You stated:
>>...the issue isn't the technology. What's so precious is the customer connection, whether on old copper loops or updated FTTx infrastructure.<<
I think that the issue "is" technology. Or, it is one of the two primary issues, the other being the increasing ability of others to compete. And while the physical connection may be precious [whether it's copper or FTTx or wireless.
These physical forms are increasingly _not_ as precious as the logical ones which ride on top of them. The logical ones are free to roam, that is, they are mobile if they are IP enabled, and the physical connections, the ones which are still switched, on their own, are not. In fact, it is my opinion that with more and different forms of local access alternatives becoming available at the physical level, they will actually become devalued over time, rather than increase in value, due to the pressures of competition.
Technology is improving with lightning speed, and the pro-competitive nature of the marketplace is on a curve that, IMO, is self explanatory: There will be more, much more, competition in the local exchange and access sectors.
Whereas, up until recently, copper loops were valued for their monthly yields over a 20-year cycle for the accounts they obviously supported, and as a function of their atomic weights and other attributes that could be found in the periodic chart of the elements, it's even greater value to the telcos resided in the fact that no one else was allowed to run these conductors on poles or in the ground.
Beyond this restriction, there has even been the restriction barring others from even reselling loops in their native form.
The rights and privileges, along with the responsibilities, of Monopoly franchising saw to that. Except for those situations where cable TV operators were allowed to run their black cables in accordance to strict municipal franchising rules. And up until recently, cable TV operators carried nothing more than one way video signals to the home, and occasionally, a little bit of 60 cycle hum. <g>
Historically, physical copper pairs from the telephone company supported undulating d.c. voice signals and low speed analog data. Once those conductors hit the central office, they may as well have hit a brick wall, for it was there that the loop service was "terminated," or handed off to either a tandem service, or to a long haul carrier. And the physical connection to the customer "did" rule, since there was no other game in town.
Today, the physical connection is only one of the necessary underpinnings of higher layers of activity. Internet users launch applications which hop onto the loop, and when the loop meets the central office switch or router, or more likely a remote access concentrator, a Higher Layer Thing happens and takes the caller's transmitted information to places around the globe without ever paying a premium for sending the freight; without being terminated; and without supervision from the incumbent telco in any manner.
And when using DSL, or even the proper configuration of ISDN or even V.34, the upper layer activity could be taking place just as I described above, supporting either data or voice or both. And a traditional lower layer (physical-dependent) voice connections could simultaneously be satisfied for a second user just as they were 10, 50 or 100 years ago, through the use of a metallic (or equiv) splitter arrangement, taking the call in a switched mode (as opposed to a higher layer mode. That is, instead of a packetized IP mode) to an LD carrier who ships the switched payload off to some remote location for $0.35 per minute or $2.35 per minute, depending on where it goes.
Perhaps you are right when you state that:
>>The ILECs cannot give that up, without having some business already in place to replace the revenue.<<
But I would add that they won't "have" to give it up, if it is the *logical* connection you are referring to. The physical connection is another story, but the logical connection is _there_ for_ the _taking_. Is it any wonder that pay-as-you-go packet accounting is becoming so fashionable? Right now it may be packet count, only, that these new accounting schemes are after. Tomorrow, don't be surprised if destination headers aren't examined, and you may be asked to pay for where the packet actually 'goes,' and how it gets there! Hey, Im not saying it'll work. Or will it?
As VoIP and other Internet multimedia techs improve, there will be no way to prevent the end user's packets of 'data' from seeking the routed connection to the service provider of their own choosing, irrespective of who owns the copper or the glass or the antennas. And that includes the much-coveted LD connections, as well, and in time, connections within the same local exchange serving area, IMO.
As things stand today, in the absence of any restrictive forms of accounting software, the emerging service-level enabled environment floats several layers above the physical connections, in other words.
They would float like Harriers, unrestricted and able to dart out to any service provider's node connected to the public Internet, or to the organized set of services which are associated with that carrier's adjacent service partners, i.e., to whomever peers with that carrier using the Internet Protocol, as well.
After coming to realize these facts, one can see how truly dangerous this Internet Technology thing is for the ILECs. And when one considers the "always-on" nature of DSL and cable modem Web Tone, or IP Dial Tone, the story gets even gloomier for the ILEC. Wireless in the future, DSL almost now, cable modems steadily increasing in numbers, and on and on, and as the competition factor gradually ceases to be the factor it was ten years ago, if I were an ILEC I would certainly think twice or at least give it some serious thought, as to whether an altered business model makes sense after all.
>>Moreover, $8 billion was derived from the loops alone. This cannot be replaced easily, even by well managed service providers, let alone the plodding incompetent management of these utilities.<<
I wasn't suggesting that they should give the copper away, not by a long shot. If they wholesaled the copper to service providers and integrators, they would realize a majority percentage of what they are now getting, and they would enjoy an incremental premium through the elimination of the overhead associated with maintaining the applications that ride over it, both in the central office and the premises, postage, back office, etc. Or, they could charge for those separately, as in the case of split DSL services.
Either way, they would come out a winner, since their longer term goal is to embed the next gen of facilities anyway, whose capabilities will far surpass those of copper, and whose rates per MB would be far less than those over copper. And think of it: This would then enable them to compete with their former, and less efficient, mainstay platform.
At one point you stated:
>In my view, that is the crux of the conundrum they have with CLECs and long distance.<
I'm not sure exactly what you meant by that, so please elaborate, if you will.
I'm enjoying this exchange of views with you, as always.
Best Regards,
Frank Coluccio |
