Senators Urged to Focus on Network Access in Merger Reviews

Senate Judiciary Antitrust Subcommittee Chmn. DeWine (R-O.) said while the merging companies argued effectively at last month’s merger hearing: “I'm still worried.” He said inter-modal competition is the “critical issue” and urged discussion of whether merger conditions are needed to ensure multiple modes of competition. Antitrust Subcommittee ranking Democrat Kohl (Wis.) said Congress and regulators must “ensure that development and deployment of these new technologies are not stifled in their infancy by today’s consolidation.” He said consumers should be free to buy Internet connections without having to buy conventional phone service with them. Kohl said Verizon’s announcement that it would offer a “naked DSL” service is promising.

Industry representatives said the merger would have real effects on consumer choice and would limit competitor access to important networks. Vonage CEO Jeffrey Citron used 911 service as an example, saying Bell companies are preventing Vonage from access 911 simply because they don’t have to allow access. Denial of access “crippled” the company’s ability to meed social goals, Citron said, and Vonage had to create its own rudimentary 911 system, which was less effective than standard 911 service. Citron said Vonage is encountering other problems, such as the ability for new customers to keep their old telephone numbers. There are concerns that Internet providers could block Vonage’s service, Citron said, as alleged in Vonage’s complaint to the FCC about independent ILEC Madison River. He said since Vonage contracts with AT&T and MCI on many core services, the mergers would raise fears that Vonage could be blocked at the core.

Though Cleland said he thought the mergers should be approved, he also said they eventually would hurt the merged companies. Predicting price cuts from competition would prove detrimental, he stressed that such robust competition could persist only if the “duty to interconnect” remains in place. “Deregulation does not mean a state of lawlessness,” he said, and he pointed to provisions like 911, CALEA and universal service as examples. Cleland also said Bells’ lack of cooperation on 911 was “insidious,” calling their opposition to municipal broadband networks “patently anticompetitive.” He said such networks, like that being built in Philadelphia, result from “extremely cheap” technology. “The Bells don’t fear municipalities as competitors,” he said: “They fear cheap technology.” Sen. Brownback (R-Kan.) said he thinks telecom competition is robust and doesn’t have the same “degree of fear” about the mergers.

Telephone and Internet service will cost consumers less if interconnection is required, said Gene Kimmelman, Consumers Union dir.-Washington office. The price of unlimited telephone service and broadband should be about $40 monthly, said Kimmelman, but cable is likely to try to charge up to $80 for these services. Municipal networks could deliver broadband to consumers for $9-$15, he said.

SBC sent a letter to Citron Mon. saying it is examining Vonage’s 911 requests. The letter said SBC offers 911 service to CLECs as part of the “TIPToP” service. “Since Vonage has expressed concern the “TIPToP tariff provides more functionality than Vonage requires, we have offered to negotiate commercial agreements for direct connection to the selective routers and the 911 database comparable to that which is provided to CLECs,” the letter said. SBC told Vonage it needs more details about the 911 functions Vonage requires.