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Have the Baby Bells won?
DerFeuervogel writes: "
This article at Yahoo describes how the Baby Bells may have already won the battle of who controls the Internet. Am I the only one who finds this disturbing?" Congress is busy working to let the Bells off the hook, clearing the way for them to finish demolishing the competing carriers such as Covad and Northpoint. Five years from now, there will be about five companies providing high-speed internet access in the United States.
This is why it will happen eventually - because people just dont get it. You say pacbell doesnt offer service in your area, OK. You say it would be fine if there were only 5 providers nationwide.
This was not meant as 5 IN YOUR AREA, it was meant as 5 in the nation and if they keep it the way it is now it will be carved up pretty much like it is now. You will be lucky if you have 2 providers in your area. They dont divide it like that because then they are competing against each other which they(they being the bells in the whole msg) dont want to do.If you are in pacbell's service area - call up qwest and see if they can provide you phone service. If you dont get hung up on you will be put on speakerphone and laughed at. It just doesnt work that way. This is not competition it is segmentation. Like warlords of old carving up real estate, making small kingdoms where they have absolute power.
If you have pacbell then they will be you broadband provider. If you have qwest now then they will be your provider. You wont have a choice you will take what is available by one of the big 5 that controls your area. THIS IS BAD! This is not competition, this is a monopoly similar to 20 years ago in the phone arena. Just divided down to a regional level.
As a former Public Utilities Commission employee, I can tell you that the Bell's do some seriously shady stuff. Interesting stat: Average USWest customer response call wass around 5 days before the merger. Average Qwest response since the merger: 5 months.
If you try to order DSL service and your particular bell tells you to take a hike, DO NOT believe them. Most of their line testing and reporting software is based of of network diagrams that are grossly incorrect. I recently ordered a DSL line for a data center last fall. My first attempt to get DSL through a bell started 2 YEARS before. I finally placed an order through Covad (Local ISP), who claimed they had DSLAMs inside the Central Office my phone service runs out of. USWest however, claimed to have Load Coils and Bridge Taps on the line, which pretty much screws the pooch for DSL. They also claimed my line ran through a SLC-90, which is a remote switching device. Again, DSL-bye-bye.
Through some twist of wierd coincidence, the sales guy I was working with had a buddy at USWest. So he came out one day and examined the line itself (not a damn diagram) and found that it was only 11,400 ft. of pure copper straight to the central office. Again, I try ordering, USWest says no.
So, I call UUNet. They offer DSL through a number of CLECs. In my case, I would use Covad and then conviently ride the UUNet backbone which just happens to run through the same CO. After explaining my situation to the Sales Manager at UUNet, they took the stance that USWest might bully a local ISP, but UUNet is bigger than buddha, and they'll take a hard stance.
So, my line provisioning order was personally faxed to USWest by me with a 119 page FCC ORDER that pretty much spells out any Bell has to condition lines for CLEC service.
The best thing you can do for yourself is hop on a site like DSL Reports and get as much information about your phone line as possible. Distance, where your CO is, etc. Then call your Public Utilities/Service Commission and become an "Irrate Customer". Most of the time, states themselves will spell out additional requirements to implemeting service. Then, get on the horn with AT&T, UUNet, or some other company that makes the Bells look like a corner hot dog stand, and explain your situation, and tell them to go to town. Generally, they will even COVER the cost of line conditioning assuming you are within the proper range and don't live in the middle of a cornfield in Nebraska. Your service will generally be a business grade DSL line (SDSL/768Up-Down/Full Class C...And a whopping 35ms ping to anywhere in the country for me.) and cost a bit more, but it's either that or a T1.
So what did I learn? There WAS legislation on the table to make things better for all of us and give competition a chance. Unforntunately, we've got morons.com in the White House now, who seem intent on reversing any sort of progress that was made over the last 4-5 years. It's a complete uphill battle, and unfortunately, Micheal Powell (The new FCC f$cko) doesn't really give a damn.
Remember this next time you vote guys.
The DLECs lost becuase they focused on wholesale in an unprofitable business: Internet access. Not enough margin dollars to go around. Voice is half the revenue and all of the profit in telecom.
Second, what do you think backhauls from wireless transcievers and base stations? A wireline infrastructure. It isn't cheap putting up all those antennas. Each individual location might cost less than the floor space for a DSLAM in a CO, but taken together they might, or might not, be cheaper. And for high-end business customers, nothing beats glass for cost per bit.
It is far from obvious what will win. The situation is complex, with lots of replacement technologies: Like current-generation digital wireless competing against wireline POTS - if your mobile phone is your most important phone, the easiest way to save money on phones is to shut off your land line. Of course current-generation wireless can't do broadband Internet access. For that, wireless infrastructure will have to acquire a lot more backhaul bandwidth. Will that force a copper-to-fiber transition there?
The only way to implement the intent of the Telecom Act of 1996 in opening competition for small consumers is to do structural separation of the ILECs into wholesale and retail. Then you could deregulate the market becuase everyone would be a CLEC. Don't worry: there certainly would not be an upstream supply shortage ala electricity in California. Telephone switches are not in short supply.
I wrote parts of this stuff
I am always amazed at people who claim that the only effect of the IBM antitrust suit was the enriching of lawyers or the wasting of taxpayer dollars. The mist significant effect of the antitrust suit was the incredible growth of the computer industry itself, led by the PC industry. Because of the antitrust suit, IBM published the detailed specs of all of their machines, including the IBM PC right down to providing BIOS source. This resulted in many companies cloning the PC and led to tremendous innovation in PC design as these companies competed for market advantage. If it weren't for the antitrust suit IBM would never have provided the information necessary for the clones to be produced and the PC market would never have grown the way we did. Look at what Apple did, keeping the Mac closed and crushing the cloners. IBM would have done exactly the same thing.
It would be easy to mak ethe argument that the main beneficiaries of this "failed" suit are Microsoft, Compaq and Dell.
One Provider Is Plenty.
There's nothing inherently wrong with a monopoly.
In fact, there are times when it's good to have a monopoly.
Of course, you can't let the monopoly have free reign. It must be regulated in the public interest. In exchange for having a monopoly business, the company must accept regulation.
The monopoly business gets the advantages of no competition, economy of scale, and a captive customer.
The public should get the advantages of universal service, higher levels of customer service, lower prices, and stability.
It's a win-win situation... if it's done well. Read on:
In the telco industry, it would be a generally good thing to allow the Bells to have a monopoly. But regulate hell outta them: force them to provide fiber to all new installations; to provide full and timely customer service; to upgrade switches with the latest technology instead of the antique crap they have in storage; to roll out DSL to every home within the next five years; and regulate the prices they charge.
It can be made to work, if it were approached systematically and intelligently.
Alas, what's going to happen is that competition is going to weed out the weak, and we'll be left with just a few very powerful, very wealthy, very uncontrolled telephone companies that answer to no one but their stockholders.
It's going to be ugly. The consumer will not come out the winner.
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This is untrue. In British Columbia, the tame monopoly was a godsend to most communities.
BC is a mountainous province with thousands of extremely small communities, populations well under 1000 and frequently under 300.
All these communities had telephone service of some sort (radio telephone in the most remote communities) because the monopoly was mandated to provide that service.
When those tiny communities had equipment breakdown, the telephone company had to repair the equipment, and quickly. If the repair necessitated an upgrade, the upgrade used the latest equipment, not some crappy old mechanical switch from the back storeroom.
There entire province is wired for fiber. Dinky-ass little farming communities with less than 500 people have fiber to the main switch.
There's DSL everywhere, and it's cheap ($30/mo if you supply the modem. That's about $2.50 American.)
There's fiber to the home in most new developments. The fiber stops at the interior wall, because there's no way to use it yet -- but it's there, ready and waiting.
Tame monopolies are a Good Thing. The trick, as always, is taming them. Can't take no guff from 'em!
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What is wrong with monopolies? Anglo-saxons seem to have a rabid fear of monopolies, which can lead to extremes. In the last century, for example, in England, train brakes were not standardized, precisely for fear of monopolies. Cars which had to run on severail railroad companies had to have two or more mutually incompatible brake systems. Needless to say, this added unnecessary operating complexity, useless extra-weight carried about and extra maintenance costs. All because of an irrational fear of monopoly.
Monopolies, when properly regulated, can be very effective; remember the old Bell system? Since the Bell system was broken-up in baby bells, quality of service has gone down, and the cost of local service has shot through the roof.
Only long-distance service has seen a decrease in cost, only to the benefit of big croporations, which are heavy long-distance users.
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Because, that infrastructure is granted to them by the public; right of ways and such. It is because of regulation that they were *allowed* to run the cable in the first place. They are, in effect, entrusted with the wired infrastructure in a city. They pay to maintain it, but are also permitted to make profits off it within limits.
Phone lines are not what was limited to 56k; voice circuits were (and still are) limited to 56k. DSL uses more bandwidth (in the analog sense) than a voice filter will pass.
that there are only five providers. It bothers me that there is only one provider in my area. Five is plenty enough if there is actual competition. In fact, five is possibly better than 500 since is allows efficiency of the network effects. But what we have now is more realistically classified as 1 provider since I can't call up PacBell and get service from them here in NC.
Aah, change is good. -- Rafiki
Yeah, but it ain't easy. -- Simba
Businesses should not artificialy restricted through government intervention, to do so is in violation of the US Constitution and highly un-American. ... Six individual "Baby Bells" is almost too much choice for the consumer anyway.
Dismantling monopolies is both constitutional and pro-competition. Read some antitrust history and law to temper your kneejerk libertarianism and neo-McCarthyism.
It also might be a good idea to learn something about the industry at issue before commenting. The "Baby Bells" are _regional monopolies_! The only "choice" of local telecomm provisioning that a consumer has in the US is where to live.
Only 5 companies providing high-speed internet access? Ok, I could cope with that. It's not zero competion. As long as they did it right.
But, it'll be AT&T (no dream) and the mini-bells (may all the little gods protect us).
A friend of mine is a Verizon (NET+NYNEX+Bell Atlantic) DSL customer. He has huge flakiness problems with the line, and has been dealing with their customer support drones for months. They even transfered his ticket to a 2nd level support engineer whose response was "oh, check to make sure you haven't done something stupid with your regular phone line. I'll go ahead and close the ticket."
No, there must be stronger competition than there is today. I don't know what the right solution is. Some advocate nationalizing the wires and leasing it back to multiple local providers, but I don't think that would make things any better, just more beaurecratic. Perhaps fedral grants to companies that want to lay their own wire? Or, even a loosening of the wireless provisions....
I fear the future of home Internet access. It's only going to get more flaky and more restrictive. Sigh.
Because it's the price for getting a legal monopoly to run the customer phone line. It would be fine with me if they were divested of both the mandate and the monopoly, but to let them dump the former and keep the latter would be gross government favoritism.
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/. If the government wants us to respect the law, it should set a better example.
Basically, in September 2001, Sprint will no longer have the right to acquire ELNK.
Also, a couple of days ago, Sprint filed with the SEC to sell about 10% of ELNK stock, which would leave them with a 17% stake.
All of this adds up to ELNK being a takeover target. Speculation is that the acquiring company will be MSFT (Yes, msn.com), because msn.com has gobs of uu.net dialups and a merged MSN/ELNK would no longer have to pay through the nose to Worldcom for access to them. And a merged MSN/Earthlink would have about 10M subscribers, which would put it in the same league as AOL for the ultimate showdown.
This may also play into MSN's decision not to continue providing DSL after Northpoint went tits-up. If MSN wants to buy ELNK, they'll have a DSL solution for their customers within four months, so why bother rushing?
All that aside, it doesn't change the fact that neither MSN, ELNK, nor MSPG (the old Mindspring) were phone providers. All are subject to the whims of the local ILEC or CLEC when it comes to DSL installation. And when the CLECs go *kaboom*, the DSL subscribers will be fux0red unless the ISP has another provider lined up.
It's a good time to be an ILEC. The CLECs got billions in capital from issuing bonds based on the value of their stock, which is how they built out the network. Then the CLECs got fux0red by the ILECs.
Perhaps the best example of said fux0ring would be a story I read about someone trying to get "Earthlink DSL", which was provided in his area through Covad (a CLEC). No dice, the equipment wasn't there, and the local phone company (i.e. ILEC) "wouldn't be able" to install it for a week. The customer cancelled his Earthlink contract and "decided" to get his DSL through his local phone company. The truck was there in two days and the equipment was installed. Funny, that.
The customer then told the ILEC to go screw itself, cancelled the DSL with the phone company, and signed back up with Covad through Earthlink. Since the phone company had already installed the equipment, he got his link up within the week.
Anyways - 99% of customers won't go to those lengths, and will just go with the ILEC for their DSL. The CLEC starves for cash, the interest on the bonds piles up, and finally the creditors come a-calling. One more dead CLEC, with assets available to the ILEC at pennies on the dollar.
The cheapest way to build a network is to let the other guy build the network, go tits-up, and pick it off his carcass.
You can always spot the pioneers - they're the ones with the arrows in their backs.
In truth, regardless of whether Congress is furthering the re-monopolization of the telecom infrastructure or not, that's how it's going to evolve anyway.
Maintaining wireline infrastructure is prohibitively expensive, and the costs are simply too high to support alternative, smaller scale competitors like the CLECs.
Covad, NorthPoint, e.Spire, whoever... they tried to compete with telecom companies by lowering prices, and yet using the same unbundled loops and last-mile infrastructure, and experiencing the same last-mile costs.
That is not a sustainable business model.
The reality of the situation is that the costs involved in building out voice and data services are too high to support competition. The existing infrastructure composed of millions of miles of copper wiring to houses and businesses is too costly for upstarts to replace with either new copper or fiber.
The ROI on network infrastructure build-out requires too much time for non-incumbent providers to break even, meaning that only the incumbents that have been recovering costs on the existing infrastructure for decades are the only companies that have actually seen positive returns on it, and they're the only companies that can survive long enough to see ROI on new infrastructure build-out.
That's the reality of the telecom infrastructure folks. Wireline infrastructure involves massive expenditures that can only be absorbed by the companies that originally had heavy government funding to install the infrastructure in the first place. Companies that have to go it alone, laying down fiber to the curb or home or office, or buying unbundled loops from the ILECs, cannot recover their costs.
The only infrastructures that will actually sustain new competition are the wireless infrastructures: 3G, MMDS / LMDS, wireless optical, and maybe satellite broadband. Wireline competition isn't going to continue much longer.
Conclusion: there will be competition, but don't assume or expect or demand competition in the form of DSL and Cable and Optical Ethernet and other wireline broadband standards.
Another alternative avenue for competition is the ILECs moving into new territory, competing against other ILECs. That has already happened quite a bit, with some of the RBOCs gaining CLEC status and having an almost nation-wide presence (for the US and Canada and some of Europe anyway).
Cheers and wireless.
Michael likes to peridiocally blame the downfall of Covad, Rhythms, and Northpoint on the imcumbent telcos. Damn, his rant is tiring. It's entertaining that when these companies had buckets of cash from their IPOs, and had their trophy CEOs, everyone was predicting the downfall of the RBOCs. Now when their lame business models fail, the telcos get fingered for the reason. These companies got extremely over-enthusiastic about the DSL demand, the price customer would pay, the much-hyped-but-never-proven "plug and play" installations and the optimistic hope of expanding the the copper loop limit past the usual 15Kft requirement. A lot of this optimism was fueled by vaporware from DSL product vendors, and in fact, a lot of these vendors put some serious cash into these carriers to pump them up even more. Oh yeah, the penny market DSL carriers also thought they roll out their services without building a customer service department that could spell "DSL", let alone assist with an installation problem.
Let it go, Michael.
Running for office is no longer about trying to change things for the better - it's about recieving payoff to vote for something. That's the problem, pure and simple. The Baby Bells have cash, and know which pockets to stick it into. So long as people of public office are allowed to recieve money to vote (campaign donations), then big companies will be able to pay them however they want. Sure, that's technicallly illegal, but campaign money is pretty much gotten this way.
/.ers only have a karma of 49...
REAL
SIG: HUP
Compare it to cable television. The only option in my area is MediaOne. It's HORRIBLE. There are 99 channels, of which about half are mexican infomercials or japanese game shows. The only cable box they provide doesnt allow blocking channels and wont work with any of my remotes. As soon as Sopranos is done for the season I'm having it cut.
ANYWAY... the point is that competition encourages providers to provide better service. I currently have Pacific Bell DSL and I'm not really thrilled with it so far.
Another thing that will happen is installations will take forever. A friend of mine was recently told it will be three months until Pacific Bell can hook up his DSL. Just think how bad it will be with no competition.
>Five years from now, there will be about five
>companies providing high-speed internet access
>in the United States.
This is only referring to DSL. Cable modems are already standardized (DOCSIS though it's not employed in all markets yet) and they are unaffected by the Bell companies. The only thing that cable MSO's rely on is the use of telephone poles for signal distribution, and even then a lot of areas are moving toward buried lines to eliminate that need.
A few months ago I was sent by Pomeroy Computer Resources to a Rhythms DSL Installer training class. There I learned several things about the way the government cleared the way for companies like Rhythms, Covad, and Northpoint.
CLEC's (Competitive Local Exchange Carriers) were given access to local phone lines in the same manner as new power companies, with the expectation of creating better rates for consumers through competition. ILEC's (Incumbent LEC's), or the Baby Bells, were REQUIRED BY LAW to give the CLEC's access to their equipment and lines to set up shop. Of course, if you were told by Unky Sam to let some stranger use your toilet and kitchen, you'd probably be a little upset, too.
The newly imposed laws on the Baby Bells required that the CLEC's get access, but the ILEC's were allowed to charge for that access, and since they owned and maintained the actual lines (with the exception of the actual egresses and DSLAM's), they charged (very heavily) for maintenance calls made by CLEC's. We were told, as installers, not to place calls in to have the ILEC perform service on the line if it was at all avoidable, because the cost would out-weigh what Rhythms was getting from the customer.
So what happened? Northpoint, with all its "venture capital" and "good ideas" tried to face off against Pacific Bell, with all of its established customers, pools of economic resources, and oh yeah, its ability to shut down the entire Northpoint network by flicking a switch. And we, as consumers, are surprised when the Baby Bells win?
I'm frankly surprised the DSL carriers have lasted as long as they have. I left my position at Pomeroy in January, and two months before that I was told to start looking for other work, as Rhythms was short of cash and was sure to start cutting contracts.
The original post mentions that 5 major carriers will eventually handle all hi-speed network access, well one other thing I learned in my training class is that Rhythms, Covad, and Northpoint were just connecting services, and that they relied on those same 5 major carriers (Rhythms primarily relied on M/E). Nothing's really changing, just the person who takes your check.
Even if people like Covad, New Edge, et al die, there will still be compeition in the broadband market. First and foremost, because the phoneline isn't the only way to get high speed to the home. Some of you may recally a crushingly huge company called @home that works with cable providers to pipe broadband down your cable line. In fact, I know more people with cablemodems than any otehr kind of high speed access. Then there are wireless options like Sprtin Broadband. Just put a little dish/attena on your roof and you're golden. So even if the bells gain 100% control over DSL, it won't matter because you'll have other options.
Also, please remember that it is often in the bell's best interest to have compeition. Why? Simple, because they often aren't so baby any more. In my area our baby bell used to be USWest, however Qwest (you know, the people with lots of fibre) bought them. Well now Qwest has a little problem, they can't sell super high speed lines like T1s and so on in the USWest controlled states until they get some local telco competition in. Well, they want to start selling more lines, so they are working on doing this. If they decided they wanted a monoply on the local/DSL market, that would cost them the super highend market.
Personally, I think that a large part of the death of the alternate providers is their own damn fault. From what I hear, Covad service leavs a lot to be desired. Here in Tucson, we have things pretty nice, we can get DSL from Qwest, New Edge, Covad and one other, cable from Cox and wireless from Sprint, Gain and 3rd Pipe, so there's plenty of options. Well, of those, Covad DSL sounds like one of the worst. For refrence I pay $75 Qwest for 640/256k buisness class DSL (the same thing is about $50 for residential class). On the face of it, Covad seems like a good deal 1.5/384k DSL for $80-90/month.Ok, fine, but with that you get more or less crap for service. The people that I know complain of outages all the time, like at least once every two months, and sometimes these outages can last in excess of 48 hours. Compare that to my Qwest DSL which has been down roughly 4 total hours in the 20 or so months I've had it. Then there's the issue of speed, apparently often the lines aren't quite good enough, so it doesn't train to full speed. Also, during peak usage times, the ISPs tend to be too loaded to support your full bandwidth, so it drops off. By comparison, if Qwest sells you a line, it will work at that speed. If your lines aren't good enough, they don't sell you a line that fast. Also, by the same token, even during peak times I still get my full 640k (and I know people with 960k lines that get all of that during peak times). Next, there's the issue of hardware. Qwest uses Cisco 678 DSL brouters. Well these things are great, they are real routers and do NAT and the whole 9 yards, plus they can work as a bridge if you ISP does it that way (I don't know any that do). Covad on the other hand gives you a crummy little flowpoint bridge, so generally you have to get your own hardware to do NAT. Finally, there's the ISP issue. With either service you can pick from a bunch of different ISPs. Qwest will more than happily be your ISP if you use their service (they are who I use) and do a real good job of it. All the rest of the Qwest ISPs are Tucson based and, of course, some are good and some are bad. All the Coavd ISPs, on the other hand, are based in other cities. Often you have to go to LA, Denver, or New York before you ever even get off their network and onto their backbone, which can then be several more hops before you get to the backbone of whoever you're trying to get ahold of.
So, a basic feature comparison of the services looks like this:
From Covad for $80/month you get ungaurenteed 1.5/384 service that is often flaky, has high pings, 1 IP, and so on. /29 of IPs (8 of them), no service restrictions, and so on.
From Qwest for $75/month (in the case of teh deal I have) you get gaurenteed 640/256 service that is rock solid, your own
You can see why I went with Qwest. Generally speaking, most people I know with the $40-50/month 640k Qwest service are a whole lot happier with their DSL than the people who have the 1.5/384 Covad service. This is not to mention that often it takes Covad 45 days or more to get you DSL whereas Qwest is pretty good about doing it in 2 weeks.
This is why I feel little sympathy for these alternate providers. It seems to me that they are more or less digging their own grave. If they can't offer service that competes with what Qwest does, well they aren't going to find many takers. They mainly got their foothold because back when USWest ran things, their DSL rollout was real half assed so you couldn't get it in 90% of the city. When Qwest took over they revamped it and now you can get it a whole lot more places, and they expand all the time.
Basically, I think that these companies are going to have to get their shit together and start providing a better quality of service if they want to stay around. While broadband is growing all the time, I still generally find that the people that look at getting it are (huge shocker here :P) power users, not AOL lamers. Well generally speaking these kind of people are like me, and value good service with their broadband. If Covad and crew can't provide that and Qwest can, guess who's going to get the most bussiness. And then, of course, when less tech savvy people ask us about what we recommend for DSL, we'll get them signed up with Qwest too. So if they die of their own incompetence, you won't find me shedding any tears.
I work closely with SBC in the carrier I work for. There are many reasons why the Bells will be cautious before destroying competitors. THe main reason is long distance. In order for the ILECs to get 271 Relief, the granting of long distance rights in a certain state, they have to prove beyond a doubt that competition is thriving in the local market. SBC had to jump through tons of hoops in order to get that Relief in Texas and Oklahoma. Now, if you drive down I-44 and I-35 from Tulsa to Dallas, you are assualted with something like 15 local phone companies like Birch Telecom and Valor and Gabriel and a host of others. All the Baby Bells want into the long distance market; they are not going to jeopardize that by crushing a DSL provider. Maybe in the future when 271 Relief is long since granted, this may be an issue. For now it is merely posturing.
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Is it me or doesn't this create a censorship problem? The fewer the providers of service there are the easier it is for some group/government/company to censor what people see on the net.
If there comes a time in the near future where broadband access is restricted to just two choices (your cable company/Teleco provider) it seems to me that anyone who wanted to could in theory deny access to certain sites or cut off access to many people at once
For example, lets say the United States goes to war with Country A, but someone in Country A is posting a website which tells of American soldiers killing women and childen..or is just generally against the US, the Military/government could just lean on the providers to block that site. Or even better for them just cut off the network from the outside world
Don't think they would do this? Remember the Gulf War? The Media functioned primarily as a propaganda wing of the Defense Department why not the Baby Bells/Cable companies who would probably get something in return for shutting off access
This just as likely could happen with someone publishing a website detailing the environmental devistation created by a company. They could find themselves misteriously without access or worse blocked from certain providers, and in this cas all you need to do is end up on 3 or 4 block lists and no one in the US could access you.
One could argue however that people could use proxies to get around the censorship but how many people would actually do that? Not many, and many more wouldn't even know how to do it.
Maybe that wont happen but I fear we might fast be approaching the day where the Internet becomes subject to the long arm of coporate and government censorship