[February 3, 2005]

Friends of mine who either now work for or are retired from an RBOC say the RBOCs know they missed the initial "Internet Revolution." With broadband now looming large in the public mind as an evolving, secondary revolution, the RBOCs, in my opinion, want to control 100 percent of the data that moves over "their" wires in the form of broadband DSL or such other services as they deem appropriate and profitable.

In other words, they have no intention of missing the current revolution. Given that their retail DSL service is sold below cost, which affects their rate of return, I am not at all sure it is about money. Bluntly, they are willing to roll over anyone and anything that gets in their way.

One very good example is the Northpoint debacle wherein that company had invested a huge sum of money in "facilities," then ran into problems competing. Verizon, acting under an obligation imposed on them by the FCC during the merger between Bell Atlantic and GTE, entered into a contract to purchase 55 percent of Northpoint then later reneged on the deal, which was one reason Northpoint shut down.

Northpoint and Verizon were to have merged their DSL operations and the shut down stranded over 100,000 customers. Eventually AT&T purchased certain assets of Northpoint at an extremely low price. Northpoint sued Verizon and settled several years later under controversial circumstances. Then Verizon wanted to count the settlement against their obligation.

All four Regional Bell Operating Companies have filed what are called "forbearance" petitions with the FCC that, if granted, effectively deregulates DSL and associated competitive rules, making DSL a monopoly of each respective ROBC organization. Forbearance has been filed as an attempt, in my opinion, to forestall what I believe to be justifiable accusations of monopolistic business practices. No other reason makes sense since Verizon, for example, controls over 90 percent of the DSL in their territory anyway.

Please note the points made in the section devoted to Business Practices.

If the FCC grants the petitions, the RBOCs will be protected, in theory, for those monopoly business practices and pricing that have effectively granted the RBOCs in excess of 90 percent of the market share for their in-house subsidiary versus those independents who have a retail or wholesale contract with any one or more of those same RBOCs, with the possible exception of Qwest. Of course that is just my opinion.

Now they want the power of exclusivity for DSL within each of their monopoly territories. Each RBOC paints a rosy picture of consumer benefit if they get their way and dire consequences if they do not. But as always with this type of service dislocation, there will be unanticipated consequences; the RBOC "Spin" leaves out as much or more than it addresses. And of course one would be advised to take note of what an RBOC does as opposed to what they say they will do.

For example, here is a quotation from a Congressman's point of view:

"The broadband decision also reflects an apparent unwillingness or inability to learn the lessons of the past.

In the late 1980s, immediately after the breakup of AT&T, the Bell companies sought relief of the restriction prohibiting them from entering the information services marketplace. They argued that if they were permitted into information services, that would give them the incentive to deploy fiber-to-the-home.

As Dave Barry might say, 'I am not making this up.'

Judge Harold Greene eventually let them into that business but they didn't deploy. Instead, they came back to Congress and the FCC and said that only if they were allowed into the cable TV business would they have the necessary revenue stream to deploy fiber-to-the-home. So in the Telcommunications Act, we bent over backwards to facilitate their entry into cable.

But again, they didn't get into cable to any great degree and they didn't deploy fiber-to-the-home. Why? Well, because they said they now needed 'interLATA data relief' for the emerging Internet marketplace. When they finally got around to opening their markets and obtaining long distance approval in their respective States, as you can now guess: they didn't deploy fiber-to-the-home. Neither did they criss-cross the country with newly-built long distance networks. They simply re-sold in large part the long distance services of AT&T, MCI, and Sprint.

Yet by then they had a new request.

Again, I am not making this up.

They said that if you de-regulate their new investments for high speed service, take out pesky competitors in the broadband marketplace, and remove certain regulatory oversight, then they'd really be going gangbusters getting fiber out to people's homes. They wanted a policy of 'new wires, new rules.'

Last Thursday, three of you agreed to endorse this proposition. And almost immediately afterwards, the Bell companies announced that they weren't going to invest. They will not deploy; that the premise of 4 years of legislation and months of your work at the FCC was nothing more than a 'fiber fable.'

By endoring the policy of 'new wires, new rules' the Bells say what we will now get is 'no new hires, no new investment.'

Do you feel betrayed? You guys look like Charlie Brown after Lucy pulls the football away. The Bells pulled it right out from under you."

—Respresentative Ed Markey (D-MA)
in his statement to the house subcommittee hearing on the FCC

The RBOCs succeeded in getting "New wires, New Rules" where they did not have to share fiber connectivity, by promising fiber to the home through huge investments. Then it was fiber to the curb, then fiber to the neighborhood, followed by fiber anywhere, we don't share.

 

1. Background

what the RBOCs really think about competition

missing the Internet revolution

>Robert Cannon

2. Pricing and Cost Issues: predatory prices crush competition

RBOC costs, for the record

3. Business Practices

4. Slamming and other dubious business practices

5. Networks

6. Customer Service

7. VNXX

8. Verizon's Petition for Forbearance

9. Unintended Consequences

10. Conclusion

RBOCs, why you need me