DSL Prime: Betrayals

Aided by politicians from all parties, the telcos prepare to tax their own customers (and QUALCOMM prepares to tax WiMAX).

by Dave Burstein of DSL Prime and Future of TV [May 22, 2006]

Betrayals
A guest editorial from Professor Susan Crawford
Crawford writes:

The Illinois Citizens Utility Board recently proposed (in the company of AT&T) that consumer protections for telephone services be eliminated—in exchange for a price cap for the next four years. Even though prices should be going down anyway.

The Illinois CUB is supposed to be a public advocate for Illinois consumers, representing their interests before the Illinois Commerce Commission. Now they look like they're on the other side.

This is one of the major telecom stories going unreported, the price increases spreading from state to state. Randall Stevenson of AT&T tells Wall Street price increases are the major factor in their earnings. Increases in price when the cost of the product is rapidly going down is another symptom of market failure. The last governor of Illinois (a Republican) is on his way to jail for corruption. Time to investigate his successor (a Democrat), as well as Democrat Bobby Rush, supporting AT&T against his constituents after collecting a cool million dollars. db

BT: "Yes." We're going to collect
Brings Net Neutrality issue to Europe
BT has for several years planned a massive video service, with a facility that was originally conceived with a scope to match Google. Until unbundled competition forced their hand, BT set standard download speeds at 512 Kbps, less than full screen video.

Cyrus Memawalla of Westhall Capital asked about Net Neutrality, and after a first evasive answer followed up and got a direct response: "Yes." Transcript from seeking Alpha, via James Enck, the best telecom reporter in Europe.

Memawalla: Would you consider charging media companies for use of your network?

Ben Verwaayen: Yes, we would. Paul?

Paul Reynolds: 21CN is not just about bandwidth and capability on that bandwidth. Some of the things that you will start to see coming through, as mentioned in this chart, is the opportunity to create new markets. So we absolutely intend to provide open interfaces to 21CN and charge for them where people can innovate and provide new services on the back of that network. In fact, you'll have to wait and see exactly what those services look like. So the answer is yes.

The issue in the UK is slightly different than in the U.S. BT Retail has "only" 31 percent market share, with at least four major competitors. In the U.S., we have only two.

Briefs

• WiMAX may have a major problem with royalties. "Qualcomm will certainly continue to man the toll-booth," writes analyst Philip Solis of ABI Research. Qualcomm bought Flarion for some key patents, and has already insisted on a royalty contract from Soma.
  
  
• If you're going to GLOBALCOMM, consider registering for the IEC sessions. They have a very strong program, including DSL experts Tom Starr, John Cioffi, Massimo Sorbara, Edward Eckert, Michail Tsatsanis, and Jan Verlinden. They also feature Ralph Brown of CableLabs, Martin Cooper (crucial developer of wireless phones), Qwest CTO Pieter Poll, BT's Paul Reynolds, and dozens of other strong speakers. The price isn't cheap, but the event is very well run and crowd small enough to meet the people you seek.

Press

• Arshad Mohammed came to the Washington Post with high expectations from his new editor: "Telecommunications is a key beat for the financial section and The Post, with its policy battles as complex and hard-fought as the State Department's. The industry is one of the big spenders on lobbying muscle and a perennial top contributor to political campaigns." Previously covering the White House and State Department, he asks tougher questions than the usual telecom reporters do. When Scott McNealy of Sun suggested competition would protect open access, Mohammed wondered, "But most ordinary Americans have at best two choices right now." McNealy tried to duck the question, Mohammed pressed on, and McNealy backed off, adding, "a choice of two is choice but in its most limited way." The Post reporter added color to a story about lawyers who lobby by calling Andrew Jay Schwartzman and Dick Wiley "Dave and Goliath," and added meat to the article by noting the over 2,000 lawyers involved in Communications. Working from Mohammed's 2,000 figure, I took the compensation of the DC lawyers, added staff and expenses, and calculated the lobbying budget at over a billion dollars a year. That's five or ten million spent to influence each decision maker, part of the "fog creation" that distorts policy.

Wall Street

• From the Ikanos 10Q, I learned Siemens subsidiary Dasan Networks has been buying VDSL chips by the hundreds of thousands, presumably for a Korea Telecom 100/100 buildout.
  
  
• "If you have to choose between two cans and a string and Vonage, take the cans and string. You'll be happier with the service," was a brutal WSJ comment about a company about to IPO, but the experience is far too common. Vonage's IPO will presumably go next week, sold in allocations to subscribers dreaming of IPO riches. Kevin Kelleher at TheStreet.com believes amateurs will create enough demand for the offering to overcome the skepticism of the professionals.

Copyright 2006 Dave Burstein.
The DSL Prime Newsletter is reprinted with permission.

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