A Chain of Reasoning
What follows is an interpretive summary of what we have learned in
putting this issue together. It is designed to be a bare bones road
map to the evolution of the regulatory landscape and the critical
changes now in the balance. It should give a high level sense of how
we got to where we are. It is intended to provide a context in which
to think about the changes being proposed.
1. In 1934 ATT was given what was tantamount to national phone
network monopoly in exchange for agreeing to regulation with right of
interconnection. In other words, it was required to hook up to
non-AT&T local carriers -- the independents -- so that local
customers could make long distance calls. With the agreement to be
regulated came the assurance of guaranteed rates of return.
2. With emergence of data communications it was decided that
companies providing data communications didn't need to be regulated
since data communication was regarded as a new, open and competitive
business.
3. The problem was that data com depended on access to the phone
networks and the issue became what to do when the phone companies
wanted to do data com themselves? Since they owned the network on
which their unregulated competitor depended, the issue was: how could
they be let into "play" without being able to use their own network
to disadvantage the competition.
4. The telcos (regulated) were let into play in this unregulated area
by agreeing to give their competition equal access including equal
cost access to their networks.
5. Equal access for everyone was assured by making the transport of
data com subject to existing common carrier regulations.
The Internet Was Born of A Separation of Transport and Services Now
Being Abandoned
6. As computers on which data com depended became more powerful, the
data com folk wanted to offer 'fancy' services on top of basic
transport. In this new context, the concern was that if these
services were regulated every one would be shoe horned into having to
offer the same price for the same services and incentive to innovate
would be lost.
7. As a result it was decided that enhanced services under Title I of
the 1934 Act could be offered with no regulation and no price
controls on top of basic data network, which was regulated, common
carrier transport under Title II of the 1934 Communications Act
8. The telcos agreed to accept these restrictions so that they too
could play in the enhanced services data com game under the
unregulated Title I part of the 1934 Act
9. With Computer Inquiry II telcos got the chance to offer enhanced
unregulated services themselves for the first time,
10. After divestiture the rules for what were "enhanced services" and
free from regulation (Title I) and what were not (Title II) and who
could offer what and on what terms were subject to argument.
11. With Computer III the telcos got even more freedom to offer
unregulated services (Title I)
12. Now the following is critical -- Title II regulation had been
designed to ensure that there could be some competition in the use of
what otherwise would have been regarded as a natural monopoly.
No Competition without Access to the Network
13. The problem was that without access to the basic network you
could not compete in the delivery of Enhanced Services and could not
innovate new services so the system was set up to guarantee all would
be providers of Enhanced Services access to the basic network under
Title II PSTN common carriage basic services.
14. With a level playing field open equally to all comers, these
comers were able to offer new and fancy data services (aka enhanced
services ) on an unregulated basis.
15. Over the long term the real problem has been that the data
services under Title I turned digital. As they did more and more
Title II analog services could be offered digitally under Title I
without regulation much more cost effectively than under Title II.
16. What we are now seeing is a convergence between the two
industries. Telecom and computing and where digital computing,
unregulated and offered under Title I, will threaten to turn suck the
Title II PSTN dry and bankrupt it.
With Convergence Only Services Worth Giving Are Unregulated (Title I)
17. Under such a scenario, everything worth doing in a really cost
effective way will have migrated from regulated Title II PSTN to
unregulated enhanced services under Title I.
18. With dial up the US and Canada adopted a regulatory theory where
Internet was an enhanced service and should not be regulated. That is
it was an enhanced service under Title I.
19. With dial up service the telecom service underlying Internet
access was considered competitive in both countries. Therefore both
forbore from regulating the otherwise common carrier dial up aspects.
20. With broadband service, since dial up was deemed competitive and
not in need of regulation, telcos requested and received forbearance
from regulating the otherwise common carrier and hence regulated
aspects of DSL.
21. The problem here was that with dial up ISPs did not need to be to
have access to and make changes to the physical guts of the network.
They could effectively attach CPE (modems) at each end.
Why Title II for DSL Matters to ISPs
22. However with DSL equipment had to be located in central offices
or remotes and attached at many places to the copper plant to make it
work. To do DSL a CLEC had to interface in a much more tightly
coupled way with the copper plant than before. The copper plant had
to be "tuned" to deliver the service in a way that dial up did not
demand. The copper plant could be tuned by the LEC or some portion of
it tuned and interconnected with by the CLEC. Then the LEC or CLEC
would sell DSL transport to the ISP.
23. With access to the physical network necessary in a way that it
was not before the change of technology, the telco has lots of new
charges that it can levy against those CLECs who would like to be
able to independently offer the service. Collocation charges,
interconnection charges, engineering study and design charges.
24. ISPs do not get to collocate, interconnect, or obtain UNEs. They
are ESPs, not carriers. Only carriers have 251/2 rights. ESPs buy
service from LECs. DSL Transport is a telecommunications service; the
ISP uses the LEC's DSL service, which is a bundle of the loop and
DSLAM and requires another service (ATM, frame relay, Gig-E) to get
to the cloud. The ISP is buying a service from the LEC. Computer
Inquiry. The ISP then adds its information service on top of the
telecom service and provides high speed Internet access to customers.
25. CLECs - be they companies like COVAD or 'affiliates like SBC ASI
-- obtain a DSL capable loop, collocate in a CO or remote and install
the DSLAM. They get UNEs and collocation under 251/2. The LEC then
provides a telecommunications service to the ISP, which adds its
information service on top of the telecom service and provides high
speed Internet access to customers.
For points 26 - 39 see http://cookreport.com/12.10.shtml
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