There's a debate among the ISPs and CLECs (collectively, the "Independent ISPs"): will the new FCC be any better than the old one, or could it even be worse?

by Alex Goldman ISP-Planet Managing Editor [February 4, 2005]

As Michael Powell prepares to leave the FCC, ISPs and CLECs face an uncertain future.

Frank Muto, co-founder of the Washington Bureau for ISP Advocacy, writes to us, concerning Powell, "given his past agenda on what competition is and favoring the BOCs, Independents can only hope that his replacement will have a better understanding about competition and give consumers the freedom of choice they deserve."

He says ISPs need to act. "We need to get involved and have a stronger say on how the next rewrite of the Telcom Act will be proposed. We need to start now and step up and be heard, by participating in current policy issues."

Charles H. Helein, partner at The Helein Law Group, a Washington, D.C. area law firm specializing in telecommunications, agrees, writing to us:

Given Powell's philosophy and ideas on what constitutes competition and a perceived bias toward the incumbents, a bias he was criticized for when he first took over as Chairman by several economists, the small business competitors can hope that his replacement will have a more realistic approach in defining competition and following through on policies and enforcement that will truly benefit all those who want choice in their providers and have the opportunity to deal with smaller firms that are hungrier and more aggressive in providing the services and products that are needed.

But all this remains to be seen. Powell reflected the Bush Administration's policies as is evident from the refusal to allow the FCC to appeal the TRO decision to the Supreme Court. The Administration will appoint Powell's successor, and that could mean more of the same.

With a new Chairman, however, it behooves the competitive side of the industry to act, to seek a say in the appointment and in the confirmation hearings and to get the members of Congress who sit on the committees that will quiz the nominee to ask the tough questions about the candidates positions that are critical to their interests in a more level playing field, on redoing the 1996 Act, and on other key policy matters.

Press coverage tends to focus on Powell's indecency rulings, because those affected the news organizations that are writing the stories. USA Today provides a more nuanced view in Visionary for digital shift or ambitious deregulator?, recognizing that some see Powell's deregulation as good while others deplore it.

The Wall Street Journal, something of an RBOC mouthpiece in its editorials while far more balanced in its reporting, recognizes, at least, that his telecoms policies were the most important part of his tenure. In After Michael Powell, an apparently byline-free editorial, the Journal writes:

Mr. Powell's battle royale, however, surrounded his efforts to address the make-believe "competition" spawned by the 1996 Telecom Act, which forced the Baby Bells to unbundle their local phone networks and lease them to rivals at discount rates. The requirements, supported by AT&T and others that subsequently built business models around this subsidy, have depressed investment and limited consumer choice.

On the ISP-CLEC list, one person wrote, "everybody thinks this is a sign of better times, but I have a sinking feeling that things aren't going to get much better."

So who will replace Powell? ISP-Planet suspects it will be the candidate from Texas, a nomination for a "stay the course" policy. One group that might be happy with this is the VoIP providers.

VoIP providers happy with Powell's tenure
Keith Kramer, executive vice president of Tamarac, Florida-based STS Telecom says, "markets go where there's the least interference. You have to give credit to Jeff Pulver, and the outgoing FCC Chairman, to Senator Sununu (R-NH) and Representative Stearns (R-FL). They've worked to eliminate regulatory encumbrances that discourage innovation and investment."

Dialup and DSL provider Larry Summers of Brownwood, Tex.-based WTS Online disagrees. In his FCC filing posted yesterday (see File now!, below), he writes:

Representative Stearns has introduced a bill that, if approved as it stands, would end the Independent ISP business up to and including dialup. Given that cable does not have to share its infrastructure with ISPs—subject to a pending court decision—then passing the Stearns bill as it reads would allow any facilities based Telco to charge whatever they want to charge for circuits that transmit data.

Jason Talley, CEO of Overland Park, Kansas-based Nuvio Corporation, agrees with the Wall Street Journal that Powell was primarily in favor of true competition. "What Chairman Powell saw, I think, is that the artificial competition induced by UNE-P was not sustainable."

Talley says VoIP is different. "VoIP is fundamentally different in that a previous 75 years of monopoly did not give any advantage to one company over another."

But Talley should be more concerned. He may ask the FCC to intervene to preserve competition in the VoIP space. "Nuvio has filed comments with the FCC. We're very concerned about companies saying, 'if you want to float packets across our network, you have to pay, or we can degrade your service.' This is especially an issue for business services sold by integrators who do not have control of the last mile. If broadband is used as an anti-competitive tool, then we would lose the benefits that Chairman Powell is banking on."

Talley points out that a broadband monopoly is still the reality in many areas. Where he lives, in suburban Kansas City, his only broadband option is Time Warner Cable (temporarily out of commission thanks to a backhoe). "We need to make sure that whatever applications someone wants to run, they can run," he says. "I live in a city with a population of two million and I have only one broadband choice."

The politics of business
If the prevailing politics is about an "ownership society" and that politics fails to distinguish between the benefits of competition and the inevitable harm to consumers and innovation that a monopoly causes, then we should be pessimistic about our telecoms future. Innovation will decline if the free market is closed, as the RBOCs decide which applications will be allowed to run on the Internet.

Although analysis by London-based Point Topic shows the U.S. as the top broadband nation, the details are troubling. The U.S. ranks third in DSL (after China and Japan), ranks second in lines added (after China), and is no longer in the top 10 by broadband penetration. Some argue that U.S. geography is an obstacle, but Canada is in the top 10 by broadband penetration. The U.S. risks falling behind in a race the nation should dominate.

If the FCC is truly interested in competition, it will need to keep the physical layer of the Internet open.

In The Future of Ideas, Lawrence Lessig writes (p.12), "So deep is the rhetoric of control within our culture that whenever one says a resource is 'free,' most believe that a price is being quoted—free, that is, as in zero cost. But 'free' has a much more fundamental meaning . . . as the philosopher of our age and founder of the Free Software Foundation Richard Stallman puts it, 'free, not in the sense of free beer, but free in the sense of free speech.'"

VoIP, and all applications, must remain free on the Internet. In some areas, customers may have a choice between a controlled network like the cable companies and RBOCs and a free network like that of a WISP that backhauls to a metro Ethernet provider, but such choice will not be available everywhere.

The risk is that in some areas, probably those more poor and more rural, customers will have to buy into a bundle on a controlled network (and may not have broadband option at all), while those in other areas, generally wealthy urban and suburban areas, will have the option of paying more to obtain their free Internet.

— End