There are two competing bills being considered in Congress. One, the Internet Freedom and Broadband Deployment Act, a.k.a. the Tauzin-Dingell Bill and the other initiative sponsored by Reps. Cannon and Conyers—the American Broadband Competition Act.

by Patricia Fusco Managing Editor ISP-Planet [July 24, 2001]

One bill would eliminate the requirements for incumbent local exchange carriers (ILECs), companies such as SBC Communications and Verizon, to share their facilities with rivals wishing to provide digital subscriber line services (DSL) over carriers local loops. The other bill makes it clear that provisioning DSL services from the "Baby Bells" is subject to the provisions of current antitrust laws.

A University of California Berkeley professor released a white paper criticizing the proposed Internet Freedom and Broadband Deployment Act of 2001 [H.R. 1542] this week.

Dr. Yale Braunstein of Berkeley's School of Information Management and Systems sent copies of his paper to members of the U.S. Senate Commerce, Science and Transportation Committee, which is currently considering broadband legislation supported by the Baby Bells.

"All parties agree that competition in local broadband telecommunications is severely limited, but the provisions in the bill do not address the key problems," Dr. Braunstein wrote.

Braunstein contends that recent trends in the DSL market illustrate the monopoly-like role of the ILECs. Over the past year the ILECs share of the DSL market has increased from just below 75 percent (Figure 1) to 83 percent, while the competitive local exchange carriers' (CLECs) share has declined from 23.7 percent to 16.2 percent.

Braunstein has served as an advisor and consultant to the Federal Communications Commission, the National Telecommunications and Information Administration (NTIA), and to regulatory and licensing agencies in other countries. According to Braunstein:

The Baby Bells currently hold an increasing monopoly market share in the DSL market—over 90 percent of the residential DSL market is held by Baby Bells (Figure 2).

The recent DSL price increase imposed by the Baby Bells would not happen in a competitive market. For example, SBC Communications raised DSL rates from $39.95 a month to $49.95 a month earlier this year.

The Baby Bells set wholesale and retail margins artificially low, making it difficult to impossible for independent ISPs to compete.

The provisions in the Tauzin-Dingell bill go against the philosophy underlying the Telecommunications Act of 1996.

Braunstein said the Baby Bells have asked Congress to allow them to close their networks to competitors, arguing that they are at a competitive disadvantage.

"In a competitive market, one would expect a price increase to be accompanied by a drop in market share," Braunstein explains. "Laying aside for the moment that this claim is inconsistent with the philosophy underlying the Telecommunications Act of 1996, recent pricing practices and economic logic together demonstrate the fallacy of their claims."

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