Summer-Fall 2001

There's been much discussion about HR 1542, the Tauzin-Dingell bill. Whatever its fate, the following piece by Audrie Krause and the response by Al Hammond and APT reflect basic differences about telco policy well into the future. For more on the bill see the CyberTelecom News, the Washington Internet Project's legislation page, the two opposing articles in ISP Planet, and the Association for Community Networking exchanges.

In June 2000, NetAction released a comprehensive report describing how the Regional Bell Operating Companies (RBOCs) broke the promises they made to regulators in the 1990s to deploy high-speed fiber optic networks. If the Bells had kept those promises, almost half of the nation's households and the vast majority of our schools would already be capable of delivering high-speed Internet access. Instead, only about 500,000 households have access to the Internet over fiber. NetAction sees this as a contributing factor to the digital divide because those fiber optic networks would have been widely deployed by now in low-income urban neighborhoods and rural communities, as well as in schools, libraries and health care facilities.

The Bells' promised to deploy fiber optic networks in exchange for relief from important pro-consumer regulations. In states where regulators went along with this tradeoff, traditional rate-of-return regulation intended to protect consumers from profit gouging was replaced with incentive or price cap regulation. The change gave the Bells more profits, but few of these high-speed networks were ever completed.

This history of failed promises should be a warning to Congress to reject H.R. 1542, a bill which would allow Bell entry into long distance data markets without regard to the state of competition in local phone service. Co-authored by Rep. Billy Tauzin (R-LA) and John Dingell (D-MI), it was narrowly approved by the House Energy and Commerce Committee on May 9. (For the bill's current status, see NetAction's Broadband Briefings newsletter).

Its supporters claim H.R. 1542 will help bridge the "digital divide" by expanding broadband deployment. But what it really does is remove a key consumer protection that Congress included in the 1996 Act: the requirement that local markets be open to competition before the Bells are allowed into long distance markets in their territories.

H.R. 1542 also poses a threat to competitive DSL providers, which means it will have an impact on efforts to bridge the "digital divide" and expand access to broadband technology. Demand for all types of high-speed access is expected to skyrocket over the next few years. But full deployment of cable broadband won't be possible for several more years because of the need for network upgrades, and high-speed wireless and satellite service will also take some time to develop. That makes DSL an increasingly popular choice for consumers who want high-speed Internet access. But DSL won't remain affordable if the Bells monopolize the market, and that's a real possibility if H.R. 1542 becomes law.

Competition is crucial to keeping broadband Internet access affordable and accessible, but competitive DSL providers are in a tough position. These mostly small companies compete head-to-head with the Bells in offering high-speed service to consumers. But the Bells own the networks these companies must buy the service from in order to sell it to consumers. Since the Bells are selling to their competitors, they have absolutely no incentive to sell wholesale DSL service at an affordable price. The incentive that Congress included in The Telecommunications Act of 1996 linking entry into long distance markets to the requirement that local markets be competitive would vanish if H.R. 1542 were enacted.

If the Bells had kept their promises in the 1990s, the nation might have been fully wired with fiber optic networks by now. If the Bells had met the conditions spelled out in the 14-point checklist, the nation might already have vigorous competition in both DSL and local phone service. But the Bells chose instead to stonewall competition by engaging in protracted legal and regulatory maneuvers, and by lobbying Congress to change the law. If the Tauzin-Dingell bill is enacted, DSL will go the way of fiber optics. And the Bells will once again have stolen America's digital future.