Gun Fight at the SBC Corral

California ISPs say SBC progeny Pacific Bell is trying to run them out of town—or at least fence them out of the DSL business. Pac Bell says it ain't true, cable companies are the real villains on the broadband range. Hired guns shoot off their mouths—ISPs say them's fight'n words.

by Jim Thompson [August 28, 2001]

SBC may have their main ranch in Texas, but they're fighting a range war with Internet service providers in California. Golden State ISPs charge Pacific Bell, and its parent SBC, with unfair and anti-competitive business practices while Pac Bell pleads innocent and claims they want to work with the ISPs. In a battle that pits the ranch hands against the landowner, they've faced-off with guns drawn. The only question now is, who will blink first?

Representatives of both sides of the feud met under a flag of truce in mid-August as a last ditch effort to settle the dispute before government regulators are called in to mediate.

The feud has been going on for a long time, but escalated on July 26 when the California Internet Service Providers Association (CISPA) filed a formal complaint with the California Public Utilities Commission (CPUC).

Round up the posse
In that complaint, CISPA, which represents more than 100 ISPs, charged Pac Bell with trying to drive independent service providers out of business by favoring their own broadband service (Pacific Bell Internet). The group further claims that SBC is strong-arming rivals into signing new high-speed Internet access contracts that would put them at a distinct disadvantage and make competing difficult—if not impossible.

"Pac Bell has made a conscious effort to put us out of business," said Tony Cappelli of LA Bridge Internet and DSL in Marina Del Rey, California. "They have disseminated the ISPs and eliminated any competition of choice."

Jim Pickrell, president of Brand X Internet in Santa Monica, California, echoes the sentiments of many ISPs who deal with SBC and Pac Bell. "The general mood is one of anger bordering on a desire for public violence, tempered by the fact that most of these people are law abiding citizens," he said. "There is really a lot of anger against Pac Bell."

Getting information from Pacific Bell was not an easy task. Although a spokesman did respond quickly to my call to give their side of this story, he was more interested in discussing old issues and his personal feelings about ISP-Planet than addressing the question at hand.

Smile when you say that
"I think ISP-Planet is a one-sided ISP propaganda rag that doesn't accurately tell both sides of the story," said John Britton, spokesman for Pacific Bell.

After continuing to insist that he address my questions about the current issues with ISPs, Britton finally said he would, "roll the dice," and "take a chance." I've been in the business for many years, but have never encountered anything like this.

When I was finally able to get him to talk about the current concerns of the ISPs, his went out of his way to note that his tone was conciliatory. "We care about them (ISPs). We met with them today (August 15, 2001). We're working with them. We're listening to them. We have a vision of the future that includes the ISPs."

One of the ISPs long-standing complaints against Pac Bell is what they say is an unfair price advantage enjoyed by Pacific Bell Internet (PBI). They claim that the high price of leasing from Pac Bell prevents them from making a reasonable profit and has forced many out of business.

"Business in SBC areas is a guaranteed money loser for the ISP," commented Pickrell. "There is no way you can take a product that costs $74, add your own Internet service, support and so on, and sell it at $39.95 or $49.95, the price which SBC charges, and make a profit."

Poor service by Pac Bell is yet another problem, he added. "ISPs in Pac Bell areas are forced to pay $200 installation fees and SBC generally puts them at the end of the queue. Installation often takes months, with all sorts of 'difficulties' left unexplained."

Reach for the sky partner
Cappelli noted that the high costs charged by Pac Bell have resulted in severe hardship for ISPs. "They charge us over $1,000 a month for an ATM circuit and we've spent about $90,000 over the last year for equipment along with another $30 per month for each virtual circuit," he noted. "We've lost close to $100,000 in the last year and a half that we have been partnered with Pac Bell."

Britton counters that Pac Bell is just doing what any business does—trying to make money. "Everybody needs to be able to make a fair return on their investments. SBC is investing billions. Project Pronto starts with six billion (dollars) to build remote terminals in neighbors," he commented.

In what appeared, at least to me, to be an effort to divert attention away from the current conflict, Britton added that ISPs should recognize that the real enemy is not Pacific Bell, but the cable companies.

In Britton's words, we should "stop skirmishing among ourselves and move forward together against the real opposition which is the dominate 70-percent share cable company."

Cappelli countered that, "This is just a smoke screen. Most of the ISPs think of cable as inferior because of the security issues and because it only goes out to residences and not businesses. The notion that we should concentrate on cable is silly. That's not the problem."

High prices and poor service is just the beginning, according to the ISPs. Compounding the issues is a new contract that ISPs say they are being forced to sign.

The contract demands that SBC be allowed to use the lines that the ISPs have leased from them for future broadband services which include video on demand, voice and interactive gaming. What really ticks off the ISPs is that, SBC can do this without providing any compensation to the service providers.

Don't fence me in
"They want to take our customers, use our DSL lines that we have installed and then market to our customers without making it available to us to offer," complained Cappelli.

He added that, in a letter that was sent with the contract, ISPs could have their high-speed access turned off, if they refuse to sign the contract. "There are thinly veiled threats that they will disconnect our customers if we don't sign."

In what the service providers say is the final insult, the contract calls for the ISPs to bear the cost for the infrastructure upgrades needed for the new services.

It's a bit like having your landlord decide to throw a party in the apartment you are paying for, at your expense. Sure, he owns the building, but you're the one paying rent and, who knows, you may want to throw your own party.

"It (the contract) appears to be a non-negotiable issue with them," commented Pickrell. "It was presented as an all or nothing situation."

Smokin' the peace pipe
The Pacific Bell spokesman countered that they are willing to negotiate everything with the ISPs, including the new contract. "We met with the ISPs and we hope to resolve any differences and move forward together with them and provide customers in their homes, services that will be in opposition to, and give customers choice to, the cable system."

Although the two sides continue to snarl at each other, talks are underway and there appears to be a chance for a settlement.

"I think, due to our filing a formal complaint, that they (Pacific Bell) now have an interest in working with us on reasonable solutions to what they now agree are valid concerns," said Lisa Bickford, treasurer of CISPA and general manager of InReach Internet. "I am, however, reserving judgment since they also have a history of giving lip service to us and not delivering on commitments."

Although the discussions are confidential, the current time-line calls for Pacific Bell to deliver a draft of an agreement for review by CISPA during the third week of August, 2001. The two sides, reportedly, also agreed to work on issues, like billing, that fall outside any agreement before finalizing a contract.

Pickrell is not convinced that SBC will play fair. "Frankly, as long as SBC is allowed to run an ISP, they're going to keep finding ways to do the same thing. They will continue using every trick in the book, from unfair pricing, unfair collateral charges and unfair installation practices to make sure that you as a customer don't have any choices."

Britton repeated his call for everyone to work together. "We met with them because we are sincere in trying to work with them to overcome any objections they have so we can work together to begin to position DSL as an alternative to cable modems."

After months of fightin', feudin' and fussin', it now appears that both sides in the dispute are working toward a final solution. It will, however, require a lot of give-and-take before a final resolution is achieved. Meanwhile, the guns are drawn, the feud continues and the Sheriff is rounding up the posse.

— End