ISPs AGREE FCC IS THREAT, DIFFER ON BUSH'S STANCE

When President Bush at high-tech summit said he would look to FCC for broadband leadership (CD June 14 p1), “the Administration for the first time patted Michael Powell on the back and said, ‘This is my policy,'” Consumer Federation of America Research Dir. Mark Cooper said Mon. Discussing study he wrote titled The Importance of ISPs in the Growth of the Commercial Internet, he argued that competition by independent ISPs on cable modem networks had decreased cable’s monopoly to 99.9% from 100%. “Mike Powell and the FCC call that progress,” he said: “We call that the death knell of the ISPs… We now know what the Administration wants, we know what Michael Powell wants, but we don’t think that’s what Congress wants.” Cooper noted that high-tech summit excluded his and other consumer groups, “and to my knowledge there were no ISPs there.” (Corporations that include large ISPs were represented, with AOL Time Warner Chmn. Steve Case introducing Bush and AT&T Chmn. Michael Armstrong standing on stage behind Bush during speech.)

Not everyone agreed that Bush’s signal to FCC was by default endorsement of Powell’s stated approach. “If you look at the technology White Paper from the White House” at high-tech event, said Earthlink Vp-Law & Public Policy Dave Baker, “any endorsement of the FCC’s broadband policy was noticeably absent.” Baker supports CFA paper and made it clear Mon. that independent ISPs were finding it difficult to compete in broadband, but he said Administration still hadn’t endorsed specific broadband approach. BroadNet Coalition Exec. Dir. Maura Colleton, meanwhile, said of Bush’s nod to FCC on broadband, “I think that’s the right answer.” BroadNet also released White Paper Mon., The Importance of a Broad Net: Why and How Independent ISPs Matter, that they filed with FCC as reply comments. Colleton’s group made many of same points as Cooper, but she said FCC was enforcement agency, and it should enforce existing unbundling rules to permit ISPs to interconnect to Bell company networks and compete in broadband. “We already have the answer” to broadband deployment in unbundling rules, Colleton said, “we just need to implement it.”

Studies say that FCC rules over last few decades enabled birth of thousands of ISPs, and they also agree that new FCC rules threatened to shutter those same companies. But in advocating unbundling of Bell networks for DSL, they differ from broad cross-section of high-tech industry, including High Tech Broadband Coalition, which includes Business Software Alliance (BSA), CEA, Information Technology Industry Council (ITI), the National Assn. of Mfrs. (NAM), the Semiconductor Industry Assn. (SIA) and TIA. That coalition says that phone unbundling rules for copper will continue to permit ISPs to interconnect, but that Bells should be free to invest in fiber build-outs for DSL without having to provide it to competitors.

Other studies have predicted economic benefits from intermodal competition, including 2 by TeleNomic Research Pres. Stephen Pociask. One estimated nearly $500 billion in benefits to consumers through new services including telemedicine and worker training, and another calculated 1.2 million new jobs would be created as result of full broadband deployment. Pociask is completing another broadband study with regulatory focus, Putting Broadband on High Speed: New Public Policies to Encourage Rapid Deployment, due for release by Economic Policy Institute July 8.

ISPs Dispute Level of Interconnection

Idea that ISPs still would have interconnection abilities if new fiber were forbidden to them, as suggested by High Tech Broadband Coalition, “is a bit of a misstatement,” Colleton said. She said “there are no controls on wholesale pricing” for unbundled network elements: “They give the impression they're giving it away for free, but they're not… Wholesale is a great business.” She also pointed out that fiber rollouts weren’t just to upgrade existing neighborhoods equipped with copper lines but also to involve new neighborhood construction: “It’s still a last-mile problem.” “Retail services [in dial-up Internet access] are vibrant and competitive” because of unbundling, Colleton said: “Why the Commission would propose eliminating that [for broadband] seems to us to be really funny math.”

American ISP Assn. (AISPA) Pres. Sue Ashdown said FCC’s wireline rulemaking sought to make official what she said Bells already were doing, shutting out ISPs “from the phone networks to which they have legal rights, thereby preventing them from selling broadband at all.” Cooper offered statistics to support Ashdown’s claim, saying cable and telephone companies had only 5% of dial-up market but 95% of broadband market: “They hijack the broadband infrastructure… they've stolen it by exclusion.” Cooper’s paper was endorsed by Cal. and Tex. ISP Assns. More than 400 ISP members of AISPA have filed in FCC wireline proceeding, Ashdown said, while Bells “already are treating the FCC’s tentative conclusions as fait accompli.”

Perception that FCC already appears to have made up its mind despite flurry of filings and protests from ISPs wasn’t lost on Cooper. Noting number of FCC rules that had been dismissed because Commission failed to adhere to statute or filings, he said “it’s disappointing that their minds appear to be made up” at FCC but that his and other filings would make strong case for appeal and possible court overturning of any rules that would harm ISPs. He promised litigation if FCC ruled that way most ISPs feared: “A lawsuit will come in the blink of an eye as soon as there’s a cure.” That presumably would be good news for both AISPA and BroadNet, neither of which boasts financial resources for legal fight against FCC.

If unbundling is extended to DSL services, rural carriers should be exempt from obligation, National Telecom Coop Assn. said in its reply comments. “Artificially induced competition decreases the financial viability of the rural telephone companies and adversely affects the business case for broadband deployment,” it said: “Thus, the introduction of competition in rural areas that cannot support it will actually slow, if not altogether stop, the deployment of broadband and other services.” NTCA said rural phone companies initially were exempted from existing interconnection, unbundling and resale requirements, and if FCC imposed obligations on broadband “it is imperative that the Commission also adopts the current rural protections built into the law.”