Cisco Bashes BITS Bill Backed by House Telecom Leader

Cisco Dir.-Technology & Communications Policy Jeffrey Campbell had warned earlier that the BITS measure represented backsliding into active regulation of the Internet. He said it could inject the federal govt. into access, peering and standards-setting. Campbell said the bill was of a piece with state moves to regulate VoIP.

The program was held by TeleCONSENSUS and the San Jose Silicon Valley Chamber of Commerce. TeleCONSENSUS has about 190 business members -- “most of the major stakeholders in the telecommunications industry as well as many others” -- formed by the U.S. Chamber of Commerce, the National Assn. of Mfrs. and the National Black Chamber of Commerce, said Thomas Myers, U.S. Chamber dir.- regulatory affairs. The group is holding similar meetings around the country, as often as possible with Congress members, he said.

Radanovich emphasized a need to “end burdensome and meddlesome regulation that dampens innovation and investment.” Telecom’s rebound from the bubble burst has come partly because of a reduction in regulation, he said. Radanovich described a landscape of strong competition, with cable and telcos invading each other’s turf and customers having a wide range of choice in Internet access. He said he supports legislation to increase the number of video service providers and in general let companies “compete on a level playing field” by eliminating market entry barriers. Cal. Cable & Telecom Assn. Pres. Dennis Mangers endorsed efforts to “stimulate competition” while ensuring a level field.

Legislators in both Cal. houses are working on video- franchising bills, Mangers said. AT&T’s position in Sacramento is that it should get one-stop shopping for video-service authority and then enter the communities it wants, he said. At stake is whether “cream-skimming [will] be allowed as public policy,” Mangers said. An Assembly member is preparing to introduce by a legislative deadline this month a video bill intended to address all the players’ interests, he told us after the forum. A measure on the subject may also be filed in the Cal. Senate, Mangers said. He told the forum the assemblyman’s meetings with interested companies swelled when 3 state electric utilities started showing up. The utilities will build out broadband over power lines to lease the network to video providers, Mangers said.

Cal.’s refusal to tax satellite service, as federal law allows, means city coffers may be drained of franchise fees as telcos push DBS for consumers who can’t receive the Bell’s broadband video services, Mangers said. “It will be a lot better environment when there are 4 or 5 entrants in the market” for video, he said: “Prices will go down.” But video offerings from the likes of Apple, Google and Yahoo “may make all of the rest of this sound arcane,” Mangers acknowledged, alluding to video services off the Internet. AT&T’s representative, regional executive Leon Beauchman, didn’t respond.

AT&T’s $4-$5 billion network upgrade will offer 20-25 Mbps Internet access that will support Google and Yahoo entertainment services allowing downloads of movies and TV episodes and movies “for next to nothing,” in addition to AT&T IPTV and VoIP services, Beauchman said.

Beauchman conceded AT&T’s argument that the company’s right to provide video service is guaranteed by its state telecom franchise hasn’t cut much ice with cities. AT&T predecessor SBC quietly sued the San Francisco suburb of Walnut Creek in federal court in Nov. over the city’s refusal to let it provide video service without a cable franchise. Beauchman said after the forum he had no update on the case. “We believe eventually this will be settled at the state or federal level,” he said on the panel. “Unfortunately, we don’t see that light at the end of the tunnel as close as we would like.” Mangers said Verizon -- between complaints it’s “inefficient and too costly” to secure municipal video franchises -- has acquired them from 6 Cal. municipalities on about the same terms as cable companies have received.

The 1996 Telecom Act brought a “slow motion roller coaster,” as FCC regulations were challenged in the federal courts and sent back to the Commission for reworking, said Covad Gen. Counsel James Kirkland. Meanwhile, upstarts like his company “have to invest in real time,” he said. Covad had to change its business model fundamentally 5 or 6 times because of this pattern, Kirkland said. The Act got a lot of basics right, he said, including hands off the Internet and requiring incumbent telcos to share with competitors last-mile connections to customers. “Two is not enough” networks “in terms of providing competition and innovation,” and wireless broadband is still years away from competing with cable and telcos, Kirkland said. Incumbents’ ability to recoup network investments must be balanced against Internet interests, he said. “Congress should not be in the business” of letting AT&T operate in way that makes it impossible for Covad to do business, Kirkland said.

Cisco’s Campbell agreed the 1996 Act got a lot right but said its failure on the last mile accounted for the nation’s low international standing in broadband. The U.S. has fallen behind Asian countries and is falling behind some in Europe, he said. The keys to telecom regulation should be: (1) “Certainty matters: Knowing what is going to happen is almost as important as” what the rules are, especially in a capital-intensive industry like telecom. The contrast between cable, confident in making $100 million in network investments, and the uncertain telecom business illustrate the point, Campbell said. (2) “Don’t fix what isn’t broken.” The “spectacular” success of the Internet is a product of the federal govt.’s being “smart enough to know to stay out of this,” leaving the Internet, classified as “information services,” essentially unregulated. (3) There’s no such thing as a free lunch. Congress should look to the “Internet model,” with its kaleidoscope of revenue models, as inspiration in its appreciation that “it costs money to build these facilities and make these services available.”