http://arstechnica.com/tech-policy/news/2010/02/case-closed-why-most-of-... [1]
Excitement about the approach of the Federal Communications Commission's National Broadband Plan, due March 17, is inspiring ever more dramatic calls for greater high-speed Internet connectivity in the United States. This month, FCC Chair Julius Genachowski declared that the agency wants 260 million Americans hooked up to 100 Mbps broadband by 2020. Not to be outdone, the Media and Democracy Coalition says that by that same year consumer access to "world-class networks" should equal the present rate of telephone adoption (90%+).
As these calls for ever higher benchmarks reach a fever pitch, it's worth remembering some of the grand proclamations of yesteryear. Take, for example, the TechNet group's 2002 recommendation that the government should commit to a goal of 100 Mbps to 100 million homes and small businesses by the end of the decade—in other words, now. The consortium included CEOs and executives from Cisco, Microsoft, and Hewlett Packard.
Principle number one, they declared, was that the US "should foster innovation and reduce regulations—especially with respect to broadband applications and services."
But in case you didn't notice, 100Mbps x 100 million didn't happen. About 75 to 77 million Americans currently access some kind of broadband, according to the latest data. That's only assuming, however, that you accept 200Kbps as a flavor of "high speed Internet." And a huge chunk of the population (over 30 percent) never go online at all—less because they're retired and not interested; more often because they can't afford the prices.
So why this shortfall of progress, especially compared to other countries? Some argue that everything is going fine. The US is just too spread out, that's all—and we'll catch up in due time. Others contend that we just haven't spent enough government or private sector money on the problem. But the big thesis these days is that we missed the boat by curtailing wholesale network access to the big telcos and cable ISPs. By making it more expensive for smaller providers to link to AT&T, Verizon, Comcast, or Time Warner Cable in order to build out their own middle-mile systems, the government condemned most consumers to two ISP choices, at best.
The FCC's own recently commissioned study by Harvard's Berkman Center declared that "there is extensive evidence to support the position, adopted almost universally by other advanced economies, that open access policies, where undertaken with serious regulatory engagement, contributed to broadband penetration, capacity, and affordability in the first generation of broadband."
We're not going to categorically proclaim that this is indeed the solution to the nation's broadband woes. But there's no question that the policy of the FCC for the last dozen years has been to make it more expensive and even harder for businesses and competitive service providers to get Internet or telephone access (which are increasingly the same thing) at regulated rates.
When the FCC announced it was letting Berkman do that survey, the Commission's National Broadband Plan coordinator Blair Levin declared that in so doing, the agency didn't want to "reinvent the wheel." But let's hold onto that wheel metaphor and review the extent to which the US has rolled back open access over the last dozen years. As you'll see, on just about every available platform, businesses, smaller telcos, and alternative ISPs have been given a back seat to the game.
Dedicated access
In 1996, when Congress passed its Telecommunications Act, everybody was jazzed about the dot-com boom. Policy makers assumed that investors would pour capital into building out the nation's middle mile broadband capacity, making it affordable for big corporations and wireless companies to rent lines for enterprise computing and backhaul—the circuits that link cell phone towers to network switches.
Sprint told us the company pays something like seven times for one of the thousands of special access lines it needs than what consumers pay for a single, much faster residential broadband account.
Instead, the boom fizzled. The FCC, however, kept working under the assumption that deregulation would encourage the construction of more capacity. It issued an order that gave the green light to the dismantling of "special access" price caps under certain conditions. If enough access-creating telecommunications infrastructure had "aggregated" or "colocated" in an urban area with more than 50,000 people—the agency would regard this as a sign of significant competition and lift price caps.
In addition, in 2000 the big carriers asked for, and got, yearly reductions in price cap levels based on agreed-upon percentages: three percent in 2000, and 6.5 percent for the next three years. Four incumbents—AT&T, BellSouth, QWest, and Verizon—received full price deregulation in over 100 major metropolitan areas. One of those companies, BellSouth, is now part of AT&T.
But five years later, the Government Accountability Office did an audit of 16 metropolitan areas and found very few signs of growth in facilities-based competition, signs of its shrinkage, and higher special access prices in various cities. And the GAO concluded that the FCC "does not regularly monitor and measure the development of competition, which will affect how FCC responds to emerging trends, and the actions it takes to encourage and foster such competition."
Fast forward to now, and Sprint told us the company pays something like seven times for one of the thousands of special access lines it needs than what consumers pay for a single, much faster residential broadband account. Meanwhile, a report issued last year concluded that special access charges now represent a huge chunk of incumbent telco business. The National Association of Regulatory Utility Commissioners found that in 1996, interstate special access represented less than five percent of Qwest's, Verizon's, and AT&T's total revenue. In 2007 they represented almost 30 percent of Qwest's, nearly 25 percent of Verizon's, and close to a fifth of AT&T's.
Forbearance
While the Telecom Act also ordered the big telcos to open up their high speed voice/data facilities to smaller competitors at wholesale rates, the law also offered the incumbents another exit strategy. They could petition the FCC for "forbearance" on those access rules. And they could win them if the company could prove that the region that they served was already sufficiently competitive. What forbearance critics decry about this petition process is that it comes with a kind of "shot clock"—one year that can be extended by 90 days. If the FCC doesn't act on the petition by then, the forbearance request is granted.
And so, from the get-go, nasty forbearance wars became a regular part of life at the Commission. In March of 2006, to the dismay of competitive carriers, a divided agency granted Verizon comprehensive relief from sharing its broadband infrastructure and fiber capacities with smaller voice firms. Critics decried the decision because it came without a proceeding and even without a staff-written Order; just a press release. "By allowing this petition to grant by operation of law, and without a shred of analysis, the Commission prejudges important open proceedings and ignores precedent," declared Commissioner Jonathan Adelstein at the time. "It helps one telecommunications giant at the expense of virtually everyone else, including small and rural telephone companies, and business users of all sizes."
Since then, the agency has tightened up the FCC's forbearance rules, but they continue to allow AT&T, Verizon, and Qwest a venue to raise access rates to smaller providers.
Radical surgery
Meanwhile, the cable industry also got its share of the deregulatory pie. When residential Internet companies like Earthlink and Brand X wanted to be able to connect to cable ISPs at regulated access rates, they asked the FCC to classify them as common carriers under Title II of the Telecom Act.
You'll understand why after you read what the Act says an ISP can't do.
"It shall be unlawful for any common carrier to make any unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services for or in connection with like communication service, directly or indirectly, by any means or device, or to make or give any undue or unreasonable preference or advantage to any particular person, class of persons, or locality, or to subject any particular person, class of persons, or locality to any undue or unreasonable prejudice or disadvantage."
But then FCC Chair Michael Powell's majority dug into Title I of the Act's lexicon of alternative definitions and ruled that cable modem access was better classified as an "information service" rather than a common carrier-based "telecommunications service," and was thus exempt from this requirement. Here's how the Act defines an "information service":
"The offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications, and includes electronic publishing, but does not include any use of any such capability for the management, control, or operation of a telecommunications system or the management of a telecommunications service."
"EarthLink invites us, in essence," the FCC declared, "to find a telecommunications service inside every information service, extract it, and make it a stand-alone offering to be regulated under Title II of the Act. Such radical surgery is not required."
Eventually the Commission's decision was heard and ratified by the Supreme Court in 2005, in a six to three decision that even Justice Antonin Scalia found unconvincing. "After all is said and done, after all the regulatory cant has been translated, and the smoke of agency expertise blown away," Scalia dissented, "it remains perfectly clear that someone who sells cable-modem service is 'offering' telecommunications." The FCC then declared DSL an information service as well.
Now, not only was the cable industry free to decide the extent and conditions under which smaller services could access their lines, but by abandoning a common carrier-based definition of cable, the FCC was forced to base its Internet Policy Statement on various general declarations about the Internet contained in the Telecom Act. Thus, when Comcast sued the agency for sanctioning its BitTorrent blocking in 2008, the cable giant found a strong ally in the DC Circuit Court of Appeals, whose justices clearly sympathized with the company's plea that these declaratory sections did not give the FCC any legal authority to act.
Low fiber diet
In 2003, the FCC even deregulated special access to the optical fiber lines of the big telcos, leaving smaller competitors to buy inferior links like T-1 facilities or faster (but pricier) DS3 loops. The Commission argued that "excessive network unbundling requirements tend to undermine the incentives of both incumbent LECs and new entrants to invest in new facilities and deploy new technology. The effect of unbundling on investment incentives is particularly critical in the area of broadband."
And so the agency ruled that incumbents did not have to offer unbundled access to newly rolled-out fiber loops or to the packet-switching capabilities of hybrid loops, which consist of copper and fiber. VoIP provider Cbeyond is now petitioning the FCC to reverse the decision. This policy, the company says, has left small businesses to "traipse a proverbial dirt path while a modern, three-lane highway is unused."
The point of all these deregulatory measures was, as the 2003 fiber decision emphasized, to free up the big telco and cable ISPs to invest in their networks, unhampered by access sharing obligations and competition. Classifying cable and DSL as information services, "caused vendors to delay development and deployment of innovations to consumers," the FCC opined. But even by the yardstick of deregulation's advocates, these measures have come up short. We're nowhere near TechNet's recommended 100Mbps to 100 million homes.
It's unlikely that instantly reversing these policies would suddenly speed up broadband deployment. But if "reinventing the wheel" isn't called for, at least a comprehensive look at where they've taken us is long overdue.