Delay in US broadband legislation extends uncertainty
On the fringes of the debate are the equipment providers, whose only interest ultimately is that broadband deployments continue. That explains the resources and support being dedicated to the Ethernet in the first mile (EFM) IEEE working group. The working group is investigating protocols for both fiber and copper, but the companies involved in the copper wing are working on ways of extending broadband services to the millions of US homes still connected by copper lines.
Still, there's some division in support. For companies like Alcatel and Lucent, which have established relationships with incumbent carriers for DSL equipment, and Nortel, which wants to sell Ethernet equipment, it would probably be beneficial if the ILECs emerged victorious. For others like Cisco, whose customer base has traditionally been ISPs and CLECs, a defeat for the bill could be positive.
The451 - Dec 17, 2001, 11:06 AM ET
Fears that broadband service will become a two-horse race between incumbent local exchange carriers (ILECs) providing DSL and cable companies have been assuaged by a delay in the vote on a controversial bill, interpreted as a defeat for the ILECs supporting the proposed legislation. Ultimately, the delay could prove harmful for carriers and equipment vendors across the board, as uncertainty will persist for another three months. The decision could also affect whether spending is tilted toward vendors focused on data networking equipment or traditional telecom equipment.
The Republican majority in the US House of Representatives has decided to delay a vote on the Tauzin-Dingell bill until March. The bill would allow ILECs to offer broadband service over long distance lines without requiring the carriers to prove they have opened their local loop monopolies to outside competition. The bill would also end the Federal Communication Commission's ability to force carriers to unbundle the local loop and open remote terminals. The ILECs have argued that the market for data services and local voice service are separate, so the carriers should not be subject to the business restrictions contained in the Telecom Act of 1996. That act deregulated the local loop, opening the door for the birth of the competitive local exchange carrier (CLEC) industry.
Context The Tauzin-Dingell bill was first proposed almost three years ago by the House of Representatives' telecommunications, trade and consumer protection subcommittee chairman Billy Tauzin, a Republican, and the subcommittee's ranking Democrat, John Dingell. By the middle of last year, the bill - formally known as the Internet Freedom and Broadband Deployment Act of 1999 - had gained the support of 218 cosponsors in the House of Representatives, but national elections put the issue on the back burner. The bill again gained momentum when Tauzin was made chair of the House commerce committee and Michael Powell, seen as partial to free market policies, was appointed FCC chairman. However, opposition has grown as evidence presented by the ILECs' competitors indicated that the legislation would not help bring down the price of broadband services, and Congressmen worried that support would be interpreted as anticonsumer.
Opponents of the bill - an expedient alliance of CLECs, Internet service providers and long distance carriers like AT&T, WorldCom and Sprint - argue that the proposed legislation would stifle competition and allow ILECs - Verizon, SBC, and BellSouth - to set their own prices for broadband service. In support of the bill, the ILECs argue that they have no incentive to roll out broadband if they must lease it wholesale to competitors at low prices.
The debate is complicated by the devastation of the DLECs, or data local exchange carriers - effectively independent DSL providers like NorthPoint and Rhythms NetConnections. Covad has just fought its way out of bankruptcy, but only after negotiating a retirement of substantial sums in debt. Although the DLECs erred in choosing a business model that favored network expansion ahead of customer acquisitions, it's become clear that ILECs obstructed their access to the local loop, indirectly pushing up costs and deployment intervals. Independent fixed wireless service providers - Teligent and Winstar - have both been conspicuous money holes. And @Home's bankruptcy has also pushed the balance in favor of incumbent cable companies, who typically have a de facto monopoly in their service areas.
Technology The debate that has emerged around the bill is not dissimilar to the arguments that rival ISPs made about Excite@Home's exclusive carriage on AT&T's cable systems. AT&T argued that exclusivity was a necessary evil to ensure that cable companies had enough incentive to upgrade their systems, while rival ISPs and DSL providers like SBC argued that exclusivity would mean that consumers have no choice in broadband access, and consequently in prices. The ILECs point out that they have invested in new networks designed to compete with cable and wireless rivals in the new broadband market, and the FCC has imposed a pricing scheme on the telephone companies that makes it difficult justify the large, risky investments required for competition.
On the fringes of the debate are the equipment providers, whose only interest ultimately is that broadband deployments continue.
That explains the resources and support being dedicated to the Ethernet in the first mile (EFM) IEEE working group. The working group is investigating protocols for both fiber and copper, but the companies involved in the copper wing are working on ways of extending broadband services to the millions of US homes still connected by copper lines.
Still, there's some division in support. For companies like Alcatel and Lucent, which have established relationships with incumbent carriers for DSL equipment, and Nortel, which wants to sell Ethernet equipment, it would probably be beneficial if the ILECs emerged victorious. For others like Cisco, whose customer base has traditionally been ISPs and CLECs, a defeat for the bill could be positive.
Conclusion There's likely to be some debate as to which camp the delay favors, but for equipment vendors, the uncertainty will only serve to keep a lid on broadband deployments. However, some - Riverstone and Cisco, for example - could benefit from cable companies capitalizing on the delay to sew up the broadband market. |
