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Technology Stocks : Covad Communications - COVD

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To: Frank A. Coluccio who wrote (84)	4/15/1999 5:33:00 PM
From: lml	Read Replies (1) of 10485

Thanks, Frank. DLECs Don't know how I missed WTC's post on "Last Mile", but I did as well as a few others. DSL Plant Quite a discussion we got here. I just don't see the ILECs investing major capital in their plant only to be forced to offer it to the CLECs even at a "reasonable" price. I don't think the RBOCs will be moving forward at this point -- & they are -- without some legal counsel as to what exposure (sharing) they have on this front. To avoid redundancy along the local loop the FCC may require unbundling where it appears that no alternative sites for CLEC plant would be available to serve a particular subscriber base. If this be the case, then the issue becomes one of price to the CLECs -- & it is a difficult one. Investment by the RBOCs in new DSL plant today is being made in a more competitive, de-regulated environment than the existing plant investment. ROI on the existing plant was arguably "regulated." Today's expected ROI is arguably "not regulated" or "as regulated" since the RBOCs face competition not present when existing plant investment was made. It is my understanding that incumbents are prohibited today from owning the local loops in newly developing areas. Who owns these loops? A particular CLEC? A separate entity who just leases the lopp in the open market? If the policy against ILEC ownership is correct, then the CLECs are enjoying a market not open to the ILECs. This growing revenue stream, not available to the ILECs, IMHO, must be weighed against whatever arguments the CLECs will raise regarding leasing new DSL plant installed by the ILECs. Pricing seems to be key, but I think ubiquitous deployment of DSL seems paramount to true competition at the moment. The FCC has taken this particular stance in the current debate regarding opening up Internet among the cable providers (T v. AOL). Similar to the FCC's current position on this issue, perhaps down the road we will see more regulation of DSL plant. But for now, my bet is with letting the ILECs enjoy the fruits of their new investments going forward. JMO.

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