DSL

DSL Prime News: SBC's Nefarious Plan

Some are calling this the politics story of the year. DSL Prime warns that SBC is already blocking independent ISPs' ability to provide valuable video services—and that cable providers and the other Bells could do the same.

by Dave Burstein DSL Prime [August 30, 2001]

SBC "Contract Killer" means they want control
That is clearly their strategy—block incoming video by refusing quality of service, but provide that quality to controlled "value-add" services that pay them well. The cable guys call this a "walled garden", but I think walls like that resemble a prison—or the old East Berlin.

The network designs, wall street statements, public plans, official testimony—and many not-for-attribution comments—have made the conclusion unmistakable. The telcos (SBC in the lead) want to erect toll barriers on the net, making "MovieFly" and other video programming impossible to deliver without large payments to the telcos.

Front page headlines appeared when Time Warner dropped Disney from cable systems, and politicians screamed. But most decisions are hidden—I was the only reporter asking questions at an FCC hearing where SBC claimed that projects like MovieFly were economically impossible if they were to build Project Pronto.

The studios are big enough to fight back, but we all must fight to make possible other voices who can create video channels—your church, college football team, local town, professional association, preferred language, political beliefs.

Americans watch television far more than they read. As technology brings down the cost of delivering video, access to the fast internet pipes will become a crucial freedom of speech issue.

This is far more than an obscure business dispute, although I think it crucial to keep ISPs alive. It also is essential to the business plans of anyone in TV and video. Craig Barrett of Intel and Steve Ballmer of Microsoft both recently identified the slow growth of the fast net in the US as devastating.

Korea and Canada are already far ahead, and Japan and Germany look to be on track to pass us in the next year and accelerate from there.

ISPs to SBC: Let us stay alive!
The California and Texas ISP Associations are up in arms, as their members are fighting for their continued existence. We have been reporting for over a year that the bells have priced ISPs out of the industry, charging them a "wholesale" rate of $30-35, more than Bell Canada charges at retail, and nearly twice what Deutsche Telekom is charging ($18 or less).

The result has long been clear—rhetoric about open access and a consumer choice of ISPs was hollow. But ISPs been unable to get together to fight back—bringing them into an association has been like herding cats. So they have been dying, one by one, with bleak prospects for all as the Internet moves to broadband.

SBC is planning to offer services over DSL they have been specifically denying to the FCC are possible. John Britton of SBC told TechTV "ISPs will continue to be the access point to the Web, but there are going to be emerging, non-Internet broadband applications, such as entertainment offerings like movies on demand and interactive games," Britton said. "The DSL customer will not just have the Web Channel One, but they'll have Channel Two movies on demand, Channel Three interactive games, and who knows where it will all grow from there."

Video, of course, requires a reliable service speed—the service would be unmarketable if congestion caused significant dropouts. That reliable service is exactly what SBC has been telling regulators it cannot provide to competitors through Project Pronto. The result—no competition in advanced services over the phone network.

In reality, today's DLC/remote terminals can be ordered with enough capacity to offer reliable, non-blocking service, at virtually the same installed price. SBC's Pronto suppliers could easily deliver a unit that would allow competitors to also offer video, high speed gaming, and voice. Their refusal to install such a system will cripple their own offerings promised above, per discussion with their own network people, and so we have to assume they plan to upgrade. Means their current equipment decisions are stupid (field upgrades are much more expensive), they are lying about their service intentions, or they are deliberately designing Pronto to rule out competition.

We do not believe SBC is stupid.

We are journalists, not investment advisers; invest at your own risk and do further research.

Copyright 2001 Dave Burstein.
The DSL Prime Newsletter is reprinted with permission.

"The power of the printing press belongs solely to those who own the presses"
—A.J. Leibling

The Internet is the cheapest printing press ever invented.

1. DSL Prime News	4. Prime News Briefs: People
2. DSL Prime on Covad and Rhythms	5. SBC's Nefarious Plan
3. Prime News Briefs: Technology	>6. DSL Prime Editorial