Copyright 2002 The Denver Post Corporation  
The Denver Post
March 31, 2002 Sunday 2D EDITION
SECTION: BUSINESS; Pg. K-03

LENGTH: 991 words

HEADLINE: Fair treatment for Bells, upstarts sorely needed

BYLINE: Jennifer Beauprez and Kris Hudson, TECH TOWN,

BODY:
Michael Powell would have you think the Federal Communications  Commission lovingly embraces the Baby Bells and their upstart  competitors spawned by the 1996 Telecom Act.

Yet if you work at a new telecom company attempting to  survive, you're feeling decidedly unloved these days. FCC Chairman  Powell has a lot to do with that.

So far this year, the FCC has twice pulled a smackdown on the  competitive telecom and Internet industries.

First, the FCC issued preliminary rules in February that will  remove regulatory restrictions on Baby Bells' Internet services  such as digital subscriber-line service, or DSL. More recently,  the FCC elected to keep cable lines deregulated and therefore  closed to use by competitors, namely Internet service providers.

The result is that new companies no longer able to afford  building their own pipes to consumers' homes are seeing their only  other option shut off. Their access to the Baby Bells' phone lines  is precarious. Meanwhile, cable lines remain exclusive.

This is bad for consumers. No matter how you slice it,  providing consumers fewer choices for phone or Internet services  amounts to fewer consumer benefits. That's what these FCC actions  would do.

'The real consequence of this direction could be that for new  broadband services, consumers will have fewer choices than they  have for Internet access today - which could mean fewer new  services and less innovation,' said John Nakahata, an FCC chief of  staff from 1997 to 1998 and now a Washington attorney.

Powell doesn't see it that way, though. Speaking at the  CompTel telecom conference in Miami early this month, he lauded  his administration's diligence in making tough decisions quickly.  He praised the FCC for winning Capitol Hill's approval to bolster  its disciplinary powers. And, in veiled terms, he told his  audience of telecom upstarts to quit whining.

'Sometimes, it's not as bad as you all in the industry say it  is,' Powell said. 'Sometimes, you've got to be willing to talk  about the positives as much as you talk about the negatives.'

Powell also denied what the FCC's recent decisions seem to  spell out clearly.

'Contrary to the hyperbole, our policy is not one of  preferred regulated monopoly or duopoly,' he said.

Sure seems close, though. It wouldn't be heavily regulated,  but the communications industry would end up a Baby Bell-cable  duopoly under this plan. To classify some Baby Bell services -  including DSL, video over phone lines and, eventually, voice calls  transmitted as data - as unregulated information services would  give the Bells the freedom to finish squashing their competition.  It would loosen the Baby Bells' current obligation to provide  competitors nondiscriminatory access to their phone lines to  deliver the same services.

Why don't young telecoms just build their own wires and thus  control their own destinies? The huge piles of cash needed to do  that are no longer available. Thus, telecom upstarts are doomed at  least for the foreseeable future to relying on the Baby Bells'  phone lines.

Sure, you can argue that the telecom upstarts sealed their  own fate. Many new telecom firms blew way too much money in recent  years and devised dumb business plans. Yet some of that is to be  expected in an industry's evolution. After all, the original  telecom industry wasn't built in just a few years. Why not keep  regulatory safeguards in place a while longer to foster  competition?  

With cable, the question is whether to regulate.

Some cable companies have dabbled with allowing competitor  ISPs to use their lines in market trials. But, for the most part,  cable lines remain off-limits to any firm not favored by the cable  company.

That's a problem because, while most Internet surfers still  use dial-up connections over phone lines, cable lines have quickly  become a popular choice due to their capacity to handle new,  bandwidth-hungry uses such as video and audio streaming. Thus, as  the Internet shifts toward high-speed connections such as cable  lines and DSL, the FCC has set policy that effectively grants a  handful of companies control over those media.

'The most difficult thing here is figuring out the market  structure you want to have,' Nakahata said. 'How much are you  willing to have a world where all your communications can come in  through two or three network providers who can manipulate and  control the content if they want?'

The question is this: Assuming Bells and cable operators are  treated similarly, is total regulation or total deregulation best?

Qwest argues that regulation of both should be lifted.

'We'd obviously prefer less regulation. But whatever you do,  don't treat (cable and Baby Bells) disparately,' said Chuck Ward,  a Qwest vice president of policy and law.

The Center for Digital Democracy favors regulation of both.  The Washington-based consumer advocacy group said so in joining  with the Consumer's Union and the Consumer Federation of America  last week in suing the FCC over its decision to keep cable  unregulated.

'Instead of eliminating the open-access safeguards, they both  should be required to provide an open network that is fairly run,'  said Jeff Chester, the center's executive director.  

We agree  with Chester. While increased regulation often isn't a favored  choice, the playing field is not level in this case. The Baby Bell  and cable networks were built under government-sanctioned  monopolies. Young telecom and Internet firms didn't have that  luxury and can't compete with the clout an unfettered duopoly  would wield.

Jennifer Beauprez (jbeauprez@ denverpost.com) writes on  technology and the Internet. Kris Hudson (khudson@denverpost.com)  covers telecommunications.

LOAD-DATE: April 02, 2002