Telco legislation not favorable to IT managers

By Pimm Fox, Computerworld |  Business

The most reckless attempt by lawmakers to meddle in IT issues is the current effort by House Energy and Commerce Committee Chairman W.J. "Billy" Tauzin (R-La.) and John Dingell (D-Mich.) to gut the 1996 Telecommunications Reform Act.

Congress passed that law to spur new telecommunications services and competition with the Baby Bells. It barred the Baby Bells from offering long-distance voice and data service until they proved that local markets were open to competitors. In addition, the law mandated that Baby Bells offer competing companies discounted access to phone lines and equipment for new services. After all, the Baby Bells inherited the copper lines and switching stations as a result of the AT&T Corp. breakup in 1984.

After the 1996 law took effect, new companies, armed with an estimated US$60 billion in investor money, were poised to offer alternatives for voice, data and Internet service. But reality has turned out differently.

Upstart providers Viatel Inc. and Winstar Communications Inc. have filed for Chapter 11 bankruptcy protection. NorthPoint Communications Group INc. has gone bust, Rhythms NetConnections Inc.'s viability is in question, and Covad Communications Co. has laid off 800 people and scaled back operations. The cost of gaining access to telco facilities and lines has wrecked their business models.

And contrary to the spirit and letter of the 1996 legislation, there's little competition for local business or consumer service. The reasons are as complex as the legislation, but the remaining Bell companies Verizon Communications Inc., SBC Communications Inc., BellSouth Corp. and Qwest Communications International Inc. have 90 percent of the local service markets. And through their regional monopolies, they also have some 70 percent of the high-speed market.

The Baby Bells were supposed to grant competitors access to their lines for the last mile of connectivity. They also had to share networks for voice and DSL services. But most of the Bells delayed broadband offerings, preferring instead to play hardball with competitors.

DSL providers rent copper lines from the Bells to offer service. In some cases, phone companies charge a DSL competitor $20 a month for the same line for which they charge residential customers $12. In addition, DSL providers rent space at phone company facilities typically a rack in a cage at rates as high as $50,000 a month to house their equipment. The local phone companies thwarted newcomers with tactics guaranteed to produce losses for competitors.

The Tauzin-Dingell bill strips away injunctions that bar the Baby Bells from the long-distance data market while letting them prevent competitors from leasing or reselling services necessary for broadband deployment.

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