1. I'd Say on July 8, 2005 01:40 PM writes...

I'd say pretty right on. To bad it won't change with all $$$ being thrown around in Washington. Some get it upfront, others when they retire to "Consult" with the very same Companies. Strange how that happens. ;)

2. CG on July 8, 2005 01:43 PM writes...

Martin is not only a tool of monopoly, he is a tool, period.

Martin and the entire FCC are nothing but shills for the monopoly LECs and cable providers. Why doesn't someone ask Mr. Martin where our USF fees are going? Because we all know they go right into the pre-tax pockets of the LECs and the cable monopolies.

One wonders if Mr. Martin and the entire FCC aren't getting kickbacks from the monopolies? One wonders just who is in charge of regulating the FCC? Whatever happened to "checks and balances?"

3. This side of the void on July 8, 2005 02:29 PM writes...

What is this? Communist Russia? Since when are private businesses under obligation to share their assets with rival companies who made no similar investments? That's like building a house with your own money, only to have the government force you to get roommates.

It is true that opening proprietary networks to third party competitors puts a downward pressure on prices, but it also prevents expansion of high speed internet access. By forcing ISPs to share lines, current regulation saps their incentive to build new ones. Think about it. If you were a Bell, would you feel more inclined to spend millions extending your high speed network to a rural town if some Earthlink or Brand X could simply hop on afterwards, undercut your prices, and take whatever revenue you were hoping to get while having made no investment in the network itself? Clearly not. What is currently happening with DSL is no more than common theft of service, ironically enforced by law.

You make the point that our take-up rate for broadband is fast approaching that of developing nations. I say you're looking in the wrong direction. A sprinter focuses ahead, not behind him. The real problem is that our internet access and penetration levels are falling behind those of other developed nations. The Japanese are already getting TV over IP and 1Gbps access is being rolled out in Hong Kong. Thanks to the horribly slow speed of most consumer lines in the US, that won't be possible for a long while? What, pray tell, could change this? Investment in upgrading our networks. Unfortunately, this won't happen without an incentive to do so. An incentive that the Bells are being robbed of. If the Bells don't upgrade, the cable companies won't have much reason to, either, since they're already faster than the Bells anyway. Then you'll have to write another column complaining about the huge lead other countries have on us.

In fact, by discouraging investment in the network itself, the legislation only ensures that the service itself worsens. I'm betting that this is one of the primary reasons that DSL service has for the most part stayed in the doldrums of 1.5Mbps access speeds while cable access has warped to around 4mbps almost everywhere. I'm a very happy Time Warner subscriber (and a former DSL user) who gets 5Mbps down (up to 8Mbps down if you choose a premium account) and laughs at my friends who made the sad mistake of choosing DSL. Thanks to the current rules, their providers have either little incentive (if it's a Bell) or no real intent (if it's a third party) to improve the performance of their connection. And yes, I will proudly and publicly say that I get fantastic service at a good price from Time Warner (digital cable + HBO + 2 set top boxes + cable access = $123/mth). I've never been happier with any other provider and have firmly supported them in their drive to keep regulation off their backs (I've even contacted Senators). There's a reason they're in the top 3 ISPs in the country for customer satisfaction at PCWorld.com.

Thank God the Supreme Court has had the wisdom not to slap DSL rules on cable internet access.

Also, your comparison of cable and Bell offerings is flawed. You must compare apples to apples, Sir, not apples to oranges. A phone line + DSL deal is not equivalent to a cable TV + cable net access deal. You're also not taking into account the fact that you'll almost certainly get MUCH faster access with the cable account. Besides, unlike DSL, cable companies don't force you to buy their non-internet service also. Here's what I suggest you do: jump ship to cable and get AT&T CallVantage or Vonage as your phone line. I've used the former for a year and have been very happy with its performance. You'll save a bundle.

Thirdly, universal access fees are a joke and should be eliminated altogether. It is widely known that the fees collected are either misused or wasted. Keep government small. If you want phone service, pay for it yourself. Don't stick the rest of us with the bill. It's not my fault that you live out in the middle of nowhere or that you're low income.

Personally I would like to see more development and investment in the internet access arena. The Supreme Court and the FCC have ensured that the cable companies are free to do so. Let's do the same for the phone companies. SBC, Verizon and Co., I'm firmly behind you all.

4. Jesse Kopelman on July 8, 2005 03:03 PM writes...

"Since when are private businesses under obligation to share their assets with rival companies who made no similar investments?"

When they are government regulated monopolies, that is when.

5. This side of the void on July 8, 2005 03:48 PM writes...

In reply to Jesse's comment above:

Why don't these 3rd party providers build their own networks? Lots of firms have. The very fact that separate cable and telephone networks exist is proof of this, as is the existence and continued operation of many other vast private networks. If you want to access a market, then build the network for it. It's not impossible. You'll be adding to the nation's physical bandwidth and making a REAL contribution to the expansion of internet access in the country insted of being a licensed pirate.

Forcing the sharing of physical networks only kills incentive for expansion and innovation (since the 3rd parties are unlikely to make much in the way of real capital investments of their own) by driving down the potential revenue of the truly risk-taking investment party. A better measure would be remove as much regulation and red tape from the construction of new networks and laying of new fiber as possible.

6. Brad Hutchings on July 8, 2005 04:53 PM writes...

I'm with you "this side". The self-identified competition optimizers, like Dana, fail to see competition that isn't direct. They hold a naive view of competition, which one might call the sports view. This view holds that there is some sanctioning body that sets the rules, decides how many teams are in the league, schedules the games, etc. Extremists in this camp like things like taxes to support stadiums, salary caps, luxury taxes. In the sports leagues, their goal is parity, usually so that all the owners can be profitable. In markets, their goal is to achieve a high school econ level model of competition. Price is the only barometer for them. Differentiation is not only not allowed, but not a desirable axis of competition. Variety is not spice, it's poison. Consumer choice beyond picking a favorite team is torture.

The reality of high speed internet today is that cable is generally in the $50 range and specializes in high up/down peak speed. Consumer DSL has dropped to $15 in major markets and specializes in predictable up/down of about 384kbps at low price. That actually is competition. Not only that, but it meets most users' current needs.

Dana, if your phone bill is $110 for DSL and phone, move. Or get on a new DSL contract. Why should the rest of us have to subsidize you or listen to your whining? Without the historical trend toward deregulation, your phone bill would be $300 or more sans DSL. The hubris it takes to think that you or any other omniscient and omnipotent (and obviously Democrat party affiliated) being could organize a market... it could fill a blimp.

7. This side of the void on July 8, 2005 06:29 PM writes...

Thank you very much for your support and level headed opinion, Mr. Hutchings. It's a rare thing nowadays, which makes it even more appreciated.

8. Fred Goldstein on July 12, 2005 12:40 PM writes...

Sorry, folks, but "this side" is over the edge.

The telcos built their monopoly networks because they convinced the government that the telephone industry was a "natural monopoly". That was indeed true, and it remains true that the loop plant itself is a natural monopoly -- the incremental cost of additional subscribers on the existing plant is far lower than the cost of an alternative provider's new plant, thus preventing new providers from competing.

Now when there's a monopoly, natural or otherwise, the standard "market" answer has been to regulate it, to prevent abuse. The entire planet understands this. Only an extreme right-wing "propertarian" fringe believes that monopolists property rights, even when granted under an expectation of regulation, are absolute and supersede regulation. Alas, that fringe has included some current and recently-departed members of the FCC.

For over a century, phone companies have been regulated as Common Carriers -- they could charge for their wires, but could not touch the content. That would be wiretapping. Yet the Bells nowadays want to do away with that, so they can cut off independent ISPs, and (this is the gist of the new IPsphere initiative) even block their captive monopoly "ISP" subscribers from accessing Internet content that doesn't pay them a cut of the action. This is obscene.

A monopoly should be entitled to a fair rate of return on its wires. That's what ISPs, CLECs, and other competitive service providers want to see. Not absolute control and monopoly rents!

9. telecom var on July 12, 2005 12:56 PM writes...

Apparently, none of you are familiar with a piece of legislature: the Telecom Act of 1996. For the Bells to sell LD, they had to open their networks. Now they have LD and closed the networks.

With SBC buying AT&T, we are back to 1982 all over again.

Take a look at your phone bill, Brad. Maybe in LA, DSL is $15 with SBC/Yahoo, but that doesn't include the ever-increasing costs of local dial-tone required to obtain DSL from SBC. In most areas of the country, it is $40 if the consumer can even get it.

DSL and FTTx networks were built by rate increases and tax incentives given to the RBOCs in exchange for broadband deployment promised in 1998!!! They would move to fiber either way because it is future proof and CLEC free.

With IMS and IPsphere coming, you will wish that there was intra-modal competition. When your Vonage line doesn't work due to port blocking, please cry to Chairman Martin. It should make for good TV.

Take a look at USF. Almost 11%! But that will be nothing compared to local taxes, when your government removes franchise rights and muni broadband rights.

As your job shifts overseas, luckily you have $15 DSL which you can pay for asking, "Do you want fries with that?"

Competition is global today. Broadband is a requirement for a community to compete for jobs.

10. Brad Hutchings on July 12, 2005 01:20 PM writes...

Fred,

What are you talking about here? The Supreme decision in question was not about whether telcos have to open their wires, it's about cable companies. Historically, they rose to prominance by a much different path than the phone monopoly. Initially, they were very local companies with very local monopolies and contracts with cities or counties. Their signal delivery business has always faced and continues to face competition from satellite providers. When Congress finally decided to apply national regulation to the industry, they did so in a way that kept hands off them to the extent that the phone companies historically had.

Your charcterization of deregulators as extreme and fringe is interesting. We are in a long-term era of telecom deregulation which started at the end of the Carter administration and when Judge Green broke up Ma Bell. It has occured while both parties have had various levels of control of the FCC and state PUCs. It has been instrumental in bringing new telecom technologies to the market and making them affordable and accessible for everyone. Anytime people bitch to me about deregulation, I just ask them if they remember what a 20 minute long distance call cost in 1980 in 1980 dollars. Compare to essentially free in 2005 dollars and ask if you're better off.

The most hideous thing about telecom regulation was the accounting. Fred, I do not know if you've ever worked within a regulated accounting regime, but if you haven't... it's kinda like three times the work. First, you have business accounting to just keep things running. Then, you have formal accounting methods that public companies have to follow. Then, you have regulatory accounting with prominent categories like "pole depreciation", which is what the state regulators think a freaking telephone pole is worth, even if the service and customer you're accounting for doesn't involve a single telephone pole anywhere within 20 miles! The accounting alone is so grossly inefficient, it makes its own case for deregulation and recognizing competition from non-parallel sources (e.g. phone from cable or wireless, etc.). Nothing extreme about it at all. We live in a much different time than the early 1920s, when the only way a company could see to roll out a national network was to become a federally sponsored monopoly, with all the strings attached.

11. Fred Goldstein on July 12, 2005 04:30 PM writes...

Brad,

I am exquisitely aware of the Telecom Act, not to mention the Cable Act of 1992. And indeed I am quite familiar with telco accounting, having been inside of many ILEC cost studies, rate cases, etc. I do this sort of thing for a living.

I am not unhappy with the Supreme Court's decision in Brand X. Cable companies were never common carriers to begin with, and it was erroneous of the Ninth to infer common carriage type activities ("telecommunications service", vs just "telecommunications" sans "service") on cable.

I am very unhappy with Martin's response. He totally misreads Brand X (in his WSJ piece) as saying that property rights are triumphant, and thus should be applied to DSL. The Supremes said nothing of the sort (I may be quoted in a rebuttal piece there...). They said that the FCC was within its Chevron rights in distinguishing between DSL and cable, and (quite specifically) that their Brand X ruling had NO bearing on DSL, which could be a separate future FCC decision, not using cable as precedent.

This Side was insinuiating that DSL's copmmon carriage obligations limit its performance. That's silly. But even if it were true, I'd rather have 64 kilobits of freedom than ten Terabits of ILEC-controlled crap. And they DO want to control the content.

12. Fred Goldstein on July 12, 2005 09:38 PM writes...

bh> Anytime people bitch to me about deregulation, I just ask them if they remember what a 20 minute long distance call cost in 1980 in 1980 dollars. Compare to essentially free in 2005 dollars and ask if you're better off.

Then let's compare a free market commodity, memory chips. Do you remember what a megabyte cost in 1980? Compare the rate at which that fell vs. the rate at which a call fell.

It proves, of course, nothing, because you're using data to try to prove something that's not true. The price of LD fell over the past 25 years primarily because the COST fell. In 1980, fiber optics were still a lab item, in a few field trials. The AT&T Long Lines network was a mix of microwave radio (60-70%) and coax cable -- L5 coax, multiple conductors in a big buried tube -- was state-of-the-art. Analog frequency division multiplexing. Now, we have fiber optics with terabits of potential capacity, and gigabits lit, so the incremental cost of a minute's cross-country bandwidth is sub-penny. Not to mention cheap switching (again, due to those cheap semiconductors).

"Deregulation" advocates love to cite airlines. But the airlines WERE competitive. The PRICE was regulated in spite of that, in order to enforce an inefficient centrally-planned cross-subsidy scheme. Deregulation let the marketplace work. No airline was nationally dominant; in specific airports where there was local dominance, rates were FAR higher than on really-competitive routes.

Telephone companies are the opposite. They had a government-enforced monopoly which extended the natural monopoly (on mass-market loops, and on pre-digital switching) to the rest of the business. So the proper term for the goal of the Telecom Act is REregulation. (The EU uses it.) It uses regulation to CREATE a free market where there was none. Of course the Bush FCC has subverted and flouted it, but the intent was clearl to create competition, in part by taking away some of the incumbents' natural advantages of incumbency.

But the propertarians, following a non-capitalist economic model (it's really more mercantilist), call for DEREGULATION of the telco monopolies, allowing them to CRUSH all competition WITHOUT the protection of regulation. This does not lower prices. This does not improve service. This just rapes the public.

And just for contrast... the cable industry did not have rate-of-return protection, and was always run in an entrepreneurial manner. They were never built as common carriers, or carriers-of-last-resort. They should not be treated like monopolists (or every Tom Dick and Harry ISP would be regulated -- that was indeed an argument that MCI made on behalf of Brand X, and it backfired, or perhaps was meant to backfire). The Bells backed the Brand X case and others like it as distraction, and to create a false analogy.

13. Brad Hutchings on July 13, 2005 07:31 PM writes...

Speaking of rape Fred... Compare the cost of a service like Caller ID in 1980 versus 2005. Or to be more fair to your way of thinking, compare 1990 to 2005. Funny, you can't even make the comparison in California and most other states. Why? Because the argument that held sway with the regulators at the time was that girls would not be able to call rape crisis centers if calling phone numbers weren't anonymous from all phones. This was after Pac Bell proposed both per-call and per-line id send blocking.

I remember the debate on Caller ID getting really heated in CA around 1992/3. At the time, I was taking a graduate level "social impacts of computing" course as part of my graduate work. I wrote a paper that questioned why the pointy heads in academia, the PIRGs, and the CPUC were so politically opposed to Caller ID for phones while they relied on "From:" in the nascient Internet e-mail community to sort their inboxes.

To paraphrase the MasterCard commercial, when you're looking for examples of how pernicious the level of government regulation that used to be (and still does to many extents), examples like "Caller ID" are priceless.

14. Fred Goldstein on July 13, 2005 10:25 PM writes...

Yes, I remember the Caller ID wars well. And I'm aware of how California can be the home of grapes, nuts, and flakes.

We had Caller ID in the ISDN draft standards in the mid-1980s, and had provisions for restriction. The technology to do it on analog lines didn't happen until a little later, and it surprised me that restriction (*67) wasn't there at the get-go. But it wasn't! (PacBell wasn't the first off the mark -- they were probably Doing the Right Thing, but Bell Atlantic had jumped the gun.) Some of the telcos (like BA) thought that it would excessively devalue the service, lowering their revenue. So there was a legitimate discussion over privacy vs. capability. Then the telcos deigned to offer *67, but made it a "toggle", so if somebody had subscribed to Presentation Restriction, *67 would instead make it visible! The caller was "supposed to know", disregarding, of course, that a caller might not be home, or it might not be set up right. The FCC finally stepped in and got it right, ordering *67 as well as a separate un-restrition code *82.

As a side effect, crank calls went down too. Bart Simpson's calls to Moe's predate Caller ID. Though of course he could try *67. (Which, btw, doesn't work on 800 numbers.)

This is an example of regulation addressing social policy matters, not economic matters. It's like E911, which is a sacred cow at the FCC (as Vonage found out the hard way). Even with the CAB gone, airlines are still strictly regulated, by the FAA, with regard to safety matters. So your example isn't even relevant to my position (that common carriage at just and reasonable rates should be provided). It's just an anecodote about how a difficult social matter had to get ironed out.

15. Brad Hutchings on July 13, 2005 11:33 PM writes...

Must be an age thing Fred... I find myself a lot more comfortable with the give and take of the market in the Internet age than with the FCC ordering something from on-high and finally "getting it right". They've gotten it so right, in fact, that many calls I get from telemarketers are "Unknown Caller", indistinguishable from two friends who come up "Unknown Caller", and all able to get through to my phone despite me paying for the anonymous call block service. This kind of crap is usually fixed in a .x version upgrade for Internet technology.

I'm not going to sit and defend either the Bells or the cable companies. You readily admit in your testimony above that these are heavily regulated companies. I'll continue to say that the regulation is the root of all things evil because it has proven to be. The more the regulators step out of the way, the better things will work and the closer prices will reflect cost of actually doing business. If anything, you make a great case for not rasing the Social Security dependency age. The sooner the old guard retires, the sooner we can toss their archaic regulatory regimes aside. :-)