Why Does the US Have Expensive and Obsolescent Broadband?
COOK Report, Comparing US and Canada, Scrutinizes Current State of
Regulatory Gridlock
Introduction - Eyes Wide Shut
For the full story http://cookreport.com/12.10.shtml
The talk is all about investment in broadband. But the reality is the
use of lobbying and lawyers to twist the framework of regulations so
that cablecos and telcos are free to sell expensive and obsolescent
broadband. This issue of the COOK Report scrutinizes the current
state of regulatory gridlock in the USA. It looks to Canada to answer
questions like why Bell Canada's cost for DSL is only 10.95 Canadian
and most American prices are nearly $40.
We claim that building a broadband infrastructure is important. The
tardy telcos say that they need encouragement given the huge expense
of the buildout. However, the poor quality, broadband DSL offered is
likely so cheap to deliver that the result is a subsidy of the
inefficiencies of the old phone network. The goal is supposed to be
radical change. The result is likely more of the same. As we shall
show, policy is built on a wing and a prayer because we simply have
no way to find out what DSL actually costs companies like Verizon and
SBC to deliver.
This issue of the COOK Report describes how and why telecom
regulation in the US was successful until the collapse of the bubble
at the end of the century. In discussions with Scott McCollough and
Francois Menard it then explains the steps that the Powell FCC is
taking to give the ILECs and Cablecos in the US what they want.
Starting with the cable networks American policy, destroying
incentive to innovate, is now founded on giving free reign to the TV
content monopoly with its huge captive installed Internet base so
that it can pay down some of its debt and have a cash flow large
enough to pay the demands of the sports channels for increased
viewing fees. These people who have no clue that Internet is
something other than another form of entertainment and have no
regulatory oversight are investing capital in the wage demands of
sports figures and entertainers rather than in infrastructure and
tools necessary to enable individual Americans to compete in the
global economy. Japan, Korea and perhaps China are instead following
policies that will enable them to do in telecommunications and
information technology in general in the first half of this century
what Americans did in the last half of the century just ended.
Watching the deployment of global broadband it is hard to see the
United States as anything else except the 21st century "new" Roman
Empire with Washington running the printing presses and our public
and regulatory policy captive to the local phone companies that are
unwilling and perhaps fiscally unable to cast off their 19th century
roots. Extend to us the freedom that you have offered to the cable
networks they say. While once staid and traditional Japan engages in
creative destruction (or reconstruction) of its copper local loop
with soon to be offered 40 megabit per second DSL, in the US, the two
mega (SBC & Verizon) and two semi mega (BellSouth and Qwest) local
phone companies invest in armies of lawyers to co-opt the FCC and the
PUCs in each of the states fighting for their right to deliver what
is usually sub-megabit-per-second, "so called" DSL broadband to
American homes.
It should not be surprising that the market for DSL equipment
innovation is Korea, and Japan. And Europe. Not the imperial US where
the LECs invest in lawyers rather than innovation. While in Canada
the LEC and cableco's are effectively competing, in the US they have
a tacit agreement not to compete with the telco's beginning to drop
the price of DSL significantly below cable modem which, rather than
cut its prices, increases its bandwidth download from a possible
maximum of 1.5 to a possible maximum of 3 megabits per second .
Consequently, a small business like The COOK Report is stuck paying
$43 a month to a Comcast that thinks the Internet is just a different
form of TV and delivers abysmal service. Were it not for Vonage, we'd
happily go back to dial up.
The situation is laden with irony. Given different priorities
stemming from less backward looking imperial leadership, there is no
technological reason that, on short urban cooper loops, the ILECs
could not be delivering 10 to 20 megabit per second DSL in American
cities. American ILECs acknowledge that DSL can reach 80 to 90
percent of their customers. But the wait is going to be a long time
because there is no competition. As readers of our interview with
Pedestal Networks will see, the coverage extension is achieved by
installation in small LEC owned remote cabinets known as serving area
interfaces. There is no way that an ILEC will give a competitor
access to those interfaces. And with the FCC's intent to declare
broadband an information service, the LECs are being signaled that
they may refuse access to their networks to anyone but themselves.
Their options for pricing DSL are many and, as the articles in this
issue show, they are so complex as to defy the ability of anyone with
out access to multiple sets of LEC books to ascertain the true cost
of delivering the service. We do however have some hints. Bell Canada
can deliver DSL for $13.51 a month - a fee that includes a 15% markup
over its actual cost. This figure is approximately 10 US dollars per
month. Pedestal Networks asserts that their line powered remote
installed DSLAM bricks can enable LECs to sell DSL at $19.95 a month
and make a profit. Compare this to DSL prices of $35 to 40 a month
with recently announced competitive prices in the $26 to 29 a month
range.
What we see is the FCC and Congress in unholy alliance with the LECs
to enable them to march forward on a 20 to 30 year path converting
their networks to the new technology on a basis that is fully
subsidized by individual and small business subscribers. Perhaps
while condemning the United States to technology obsolescence, it
will save the LECs and enable them to transition their networks by
2020. And of course if it does that, it may preserve shareholders
investments. Of course if interest rates go up substantially, with
LECs overall business flat to declining, one should not count on
avoiding collapse.
Contents
Tour of Regulatory Jungle Shows Powell Effort to Undo 40 Years of FCC
Policy -- Bigger-is-Better Ideology toYield Re-monopolization and
Harm Economy Unless Stopped By Courts p.1
Understanding the FCC Regulatory Blueprint
Why the FCC Broadband Rulemaking Is a Path to the Re-Monopolization
of the Telephone Network p.4
What Changed at the FCC?
The Role of Chairman Powell in Articulating a Bigger-Is-Better Worldview p. 10
Ninth Circuit Weighs in with Brand X Rebuff
Can ISPs Demand Action from State PUCs in Face of Stalemated FCC Policy? p. 12
The Short Happy Life of Verizon's PARTs
Shoving, Jousting and Obfuscation in the FCC's Playing of the Tariff Game p. 22
Rapid Changes in DSL Technology - More Powerful, Compact, & Cheaper
DSLAMs Located in ILEC Remotes Can Bring DSL to less than $20 a month
as ISPs are Locked out of ILEC Infrastructure p. 24
But in a Fight to the Death Between Telco and Cableco Who Will Pay
For the New Infrastructure?
An essay by Tim Denton p. 29
Why Regulatory Forbearance of Broadband, Creates a Duopolistic Death
Match that Will Leave only Municipal Public Works Standing an essay
by Francois Menard with assistance from the COOK Report p. 31
McCollough on Importance of Regulatory Nuances Understanding
Differences Between Telecommunications and Telecommunications
Services - Parsing the Relationship Between Telecommunication
Services, Tariffs, Issues of Access, Non Discrimination and Price p.
37
Why We Simply Don't know What it Costs SBC and Verizon to Deliver DSL
Menard on ILEC Broadband Pricing and Regualtory Manuevers p. 41
EarthLink Shares a Jaundiced View of FCC
Brand X Reversal of Powell Holds Ray of Hope p. 47
Filling Up the Fiber:
A Look at Korean Broadband Infrastructure and Internet Traffic p. 49
Interview, Discussion, and Article Highlights p. 53
Executive Summary p. 62
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