[February 3, 2005]

9. Unintended Consequences

It seems likely that broadband services will eventually become a duopoly with cable companies on the one hand and Local Exchange Carriers on the other. Scattered pockets of 802.11 competition and some regulated spectrum cell phone operators will attempt to compete plus expensive satellite service will have some few customers, But mainly most consumers and business will be forced to look to the offerings of cable or Telco for broadband Internet access.

The institutional memory of the FCC and others should have no problem remembering when cell phone competition was limited to a duopoly. It was only after a number of other operators were allowed into the market that rates dropped and service improved. There is no current regulatory climate indicating that the FCC intends for local, independent Internet Providers to survive.

As Independent Internet providers continue the current rate of attrition in rural areas, customer service will be reduced, consumers will have fewer choices and prices will go up for basic computer service.

But it doesn't end there. I have had unconfirmed reports that Cox Cable is stripping the priority bits from VOIP transmissions. If this is true, and it certainly is technically feasible, then this is a good example why regulation is needed to prevent monopolies from exercising, well, monopoly powers.

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.

Given the direction that large and small local exchange carriers are currently moving, based on what they do as opposed to what they say, it is within the realm of probability that without regulation, even dialup circuits to Independent Internet Providers will be priced at a level that will put them out of what business is left after the business practices of those same LECs monopolize broadband.

Without question, competition has created innovation. As each RBOC and other local exchange carriers stifle competition, among the first consumer loss will be innovation. The reasons for this are simple:

a. Competition creates innovation. Forbearance kills what competition still exists in the face of predatory pricing and business practices.

b. Monopoly providers do not typically innovate. How many examples do you need? Competition was one of the prime reasons for divestiture and regulations that forced competition.

c. Large local exchange carriers, including the Bells, have vendor agreements with a restricted number of long established vendors. New, innovative technology is seldom the product of established RBOC vendors. Both Verizon and SBC could have found solutions to the several problems they attempted to solve with a sledgehammer listed herein—but the companies that have the solution were not on their approved vendor list.

I am not at all sure it is in the best interest of Verizon to kill off ISP competitors. Common knowledge associates a certain percentage of consumers who harbor complete and total disdain, even hatred, for their local phone company. The reasons for this attitude on the part of a certain percentage of the population can be as diverse as long hold times, or that people just don't like monopolies.

Whatever the reason, competition acts as a safety valve for the "phone company." In other words, there is thus a place for those who take exception to the level of service provided by the local Telco. The benefits to the phone company are obvious. This is apropos of nothing except just one more example of why there should be competition instead of a total monopoly.

 

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