DSL Prime Editorial: The Buck Stops Here, Mr. Chairman

Kevin Martin is responsible for fulfilling the President's universal broadband pledge. If he has the backbone, he will demand actual deployment as part of the merger conditions, and maybe even threaten to enforce the conditions of previous mergers.

by Dave Burstein of DSL Prime and Future of TV [July 24, 2006]

Editorial: The buck stops here, Mr. Chairman
100 percent Broadband to AT&T's Half of the United States
In 1999, Ed Whitacre promised 80 percent coverage with Project Pronto in 2002, and "all our customers" in the next few years after that, using whatever technology proved most effective. Instead, SBC stopped below 76 percent and refused to even reveal the number. If Kevin Martin has the backbone, 100 percent availability will be part of the coming AT&T/BellSouth merger. AT&T would huff and puff, but Martin faced them down before on UNE-P.

Martin says his most important task is broadband, and his President has promised "affordable broadband for all Americans in 2007." 25 percent of SBC customers don't have that choice, and if Martin doesn't step in right now the number will be almost as high on December 31, 2007. At very modest cost, AT&T could build out a profitable DSL or WiMax service to well over 90 percent, and restructure their satellite offering to make it comparable in price for the handful remaining. Equipment is now so cheap the deployment would almost surely be profitable, although not as much as some other AT&T investments. Martin knows that current satellite choices are too slow and too expensive, not honestly "affordable broadband" by today's definition. The key to making this work would be an enforceable commitment from Big Ed of affordability defined as price similarity to their main DSL offering.

Martin also can avoid another crisis seemingly inevitable this fall, when AT&T turns on their HD service and creates a prima facie antitrust violation. AT&T is blocking customers from all but six Mbps of the 20 to 25 Mbps Lightspeed connections. They refuse to sell higher speeds at reasonable or even unreasonable prices.

In England, France, Germany, Holland, and Japan, carriers are now routinely selling "up to 24 Mbps" service that delivers over 10 Mbps to most customers. The 10 to 20 meg Mbps is typically less than AT&T is charging for 3 to 6 Mbps. AT&T DSLAMs and network are designed to offer 20 Mbps or more to most customers.

The only logical reason to block off the bandwidth is to prevent folks like Disney or the Mormon Church sending video that people might prefer over AT&T's walled garden.

Not selling more than 6 Mbps effectively blocks anyone else wanting to distribute programming, because live HD TV requires 8 to 10 Mbps. If you want to watch the Southern Baptist Conference Church Service, rather than SBC's chosen programming, you can't. If MGM or Common Heritage.org wants to sell HD programs, they can't.

Antitrust law calls this an "essential facility," with decades of precedents that clearly apply. The SBC/AT&T merger agreement also demands openess, and Martin told Copps and Adelstein he would enforce that agreement. AT&T preventing consumers from watching their choice of HD television programs couold be the "Madison River" test of "access to content of your choice." Expect extreme sophistry about service plan choices and speeds obscuring the first big violation of network neutrality, with clear implications for freedom of speech and religion. Comments in Congress that "no problem is imminent or likely" are disingenuous. Not merely did Ed Whitacre and Randall Stephenson say they want a tollbooth, they are already telling reporters they will limit speeds with the result that live HD video can't challenge Lightspeed.

If Martin shows fortitude, Whitacre will back down after blustering because he wants the merger to go through. A brave judge just ruled that antitrust rules should have been more strictly applied in AT&T's last merger, after which BellSouth announced the shareholder vote will almost immediately take place. AT&T can do a bulk buy of satellite capacity cheaply, or launch one, and make sure the price is in the DSL range without losing money.

Net neutrality requires a more robust network, but the costs (even with an unlikely rapid move to video over the net) are about 3 percent of his broadband revenues. Martin can also attribute his reluctance to a need to reach consensus and avoid a 2-2 vote with Democratic opposition. Whitacre himself suggests McDowell, the third Republican, may have to recuse himself because he often fought SBC in court as a private attorney. If McDowell steps aside, Martin can appear a diplomat trying to get the merger approved. Michael Copps or Jonathan Adelstein, true battlers, can be the foil.

Martin, like Powell, Kennard, and Hundt, is smart, dedicated, honest, and hardworking. He has potential to be a great chairman, because he's spent the last decade studying the industry at a depth beyond his predecessors. I've watched him spend two days at an optical conference listening and asking intelligent questions, wanting to learn.

Martin understands technical issues better than any non-engineer I've met at the FCC except for Robert Pepper. (There's only one Pepper. He tells me he's happy roaming the globe on behalf of Cisco, but the FCC has no one who can replace his skills.)

No matter how much I respect Martin, I have to accept the consensus that he's not getting results. His preferred strategy, getting government out of the way and letting competition solve problems, often fails in a real market with two, not 5 to 10, companies involved.

"Competition doesn't work without competitors."

25 years of "deregulation" has left the FCC Chairman with very few levers. He can't pass up opportunities like this if he wants to get things done. The buck stops here, Mr. Chairman.

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

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