High-Speed Internet Legislation
Myth: Lifting regulations on DSL and other high-speed Internet services provided by local phone companies will lock competitors out of the market and give Bell companies a monopoly on high-speed Internet service. Bell monopolies will leverage their control over the local loop into control of the high-speed Internet.
Fact: Removing regulations on high-speed Internet services operated by local phone companies would not prevent Competitive Local Exchange Carriers (CLECs) from offering DSL service. CLECs would still have the right to interconnect to the local phone network and would still have the right to lease lines from local phone companies to provide DSL service to their customers. Plus, the amended bill maintains CLECs' ability to "line-share," or access part of the copper line to offer DSL and gives them the ability to buy DSL at a wholesale discount for three years.
Fact: There is no Bell monopoly in the high-speed Internet service market, nor will there be. Local phone companies dramatically trail cable companies in their share of the market. Allowing phone companies to compete in this market will provide more choices and create a competitive market. According to the Precursor Group, cable companies currently control 73% of the high-speed market. Rather than try to regulate a competitive market, Congress needs to remove the regulations that distort the market so phone companies can compete on an equal footing with cable, satellite and wireless companies.
Myth: Ending regulation of the Bells' DSL service will severely weaken the pro-competitive provisions of the Telecom Act.
Fact: This bill has nothing to do with pro-competitive provisions of the Telecom Act. Local phone companies would still be required to comply with all the market-opening provisions contained in the Act. This bill addresses the need to spur deployment and promote competition for high-speed Internet services. The focus of the Act was to open the local phone network and encourage competition in voice telecommunications services - the services in which the phone companies held a monopoly. Advanced data services, like high-speed Internet access, did not exist in any marketable form at the time the Act was passed. The Telecom Act prescribed an extensive list of regulations for opening the monopoly local phone market, not for singling out and regulating one type of provider of high-speed Internet service. There is simply no public policy justification for regulating one provider of high-speed Internet service any differently than other providers.
Myth: Lifting the interLATA restriction for data would remove the Bells' incentive to comply with the Section 271 requirements of the Act.
Fact: In order to be full-service communications providers, Bell companies need the ability to offer voice long distance. In the world of bundled services, each communications provider needs to be able to offer each piece of the bundle. The Bells have spent five years and billions of dollars opening their local markets, and they've just now begun to see the fruits of that labor (by being allowed to offer long distance in four states) - they're not about to pull back now. Lifting the restriction for data services will not change their obligation or desire to comply with the 271 process and the legal requirement that they open the local market. Plus, the FCC and state PUCs have full authority to fine them and pursue other enforcement measures if they don't.
Myth: The Bells had a chance to roll out DSL for years and they didn't because they didn't want to cannibalize their other high-margin business services. They're only rolling DSL out now to respond to competition from CLECs.
Fact: There was no demand for DSL when it was first developed. The demand for high-speed connections didn't emerge until the last several years. But competition certainly promotes deployment and innovation by all companies in any market. In fact, that's why Congress needs to remove regulations on DSL service - so all companies can compete. But all competitors must play by the same rules or consumers suffer. The system right now is not fair competition - it's a distorted marketplace that gives cable, wireless and satellite companies an advantage.
Myth: If the Bells want the relief offered by these bills, all they need to do is keep their commitment to open their local markets, as required by the Telecom Act.
Fact: Allowing local phone companies to carry data traffic across LATA boundaries is an important step, but it's just the first step. Even if local phone companies were allowed to carry data traffic anywhere in the country today, they would still face regulations on their high-speed Internet service that none of their competitors face. Congress needs to lift the LATA restrictions and remove telephone-era rules from high-speed Internet service.
Myth: This is an end-run around the Section271 provision of the Telecom Act. Once the Bells are allowed to carry data across LATA boundaries, they will turn all of their voice traffic into data packets and carry it across the country without getting long distance approval.
Fact: That would be impossible and illegal. The bill prohibits Bell companies from selling, marketing or carrying voice traffic until they've been approved by the FCC to offer long distance.
Myth: Five years after passage of the Telecom Act, the Bells still have 95% of the local market. Congress needs to pass legislation to loosen their grip, not strengthen it.
Fact: First, competition in all telecommunications markets has exploded since passage of the 1996 Act. In many markets, CLECs are taking a larger share of new business lines today than incumbent companies. Competition has been slower to develop in the residential phone market because subsidized rates reduce the profit margins available to both incumbents and new competitors - and CLECs have focused on the high-margin business market. In the local market, however, competition is taking off in states like New York and Texas in which regulators have allowed the local companies into long distance. In those states, residential customers now have multiple options for both local and long distance service.
AT&T and the CLECs don't want to argue the facts of high-speed Internet legislation so they make accusations and change the subject. The facts are that the market for high-speed Internet service has nothing to do with the local phone market, and there is no reason to extend local phone regulations to the high-speed Internet.
