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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.
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.
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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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
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.
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.
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.