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Baby Bell Deregulation Bill Fails To Pass In Kansas
Masem writes "A rather interesting debate has been happening in Kansas recently that has been mirrored across the country, in that the baby Bells have been trying to urge state governments to remove the restrictions for them to offer their lines to outside parties; in exchange, the Bells have been promising to develop a strong broadband network in the state. (See, for example, this and this story on DSL Reports for efforts in Missouri and South Carolina.) However, the legislative commission in the Kansas House of Representatives that oversees the telecomm industry has voted against such deregulation, citing concerns on monopolies and competition, despite heavy lobbying by SBC in favor of the bill. SBC has stated that they will now put their broadband deployment plans in Kansas on hold, but look towards the outcome of similar discussions on the same bill on the Senate side of the Kansas Congress."
Can these companies be held liable under the RICOH act? In essensce, what they are doing is extorting the people of these states? They are demanding huge sums of money in order to provide broadband service.
I don't think it's really extortion, since it's unlikely they would build out broadband if they _did_ have exclusivity on their lines. Here's why:
The bells have copper going everywhere. It's very expensive to run new cables places, even without right-of-way considerations. That huge expense is the reason that it took so long for many cable companies to offer broadband in many areas (Cablevision still doesn't offer it in all their areas, I think). If you don't already have right-of-way, it's extremely unfeasible to run new cables. That's why the telecomm act required the bells to share their lines in the first place.
So, assuming for the moment this passed... why would the bells bother developing a new broadband network? Once they have exclusive use of those lines, what competition is forcing them to invest the money... rather than just jacking up the prices?
As Teletruth shows bells have defaulted on their promises in the past, choosing to rake in profits from their existing infrastructure rather than invest in new (expensive) work, even when they're allowed to charge for the infrastructure work!
You might say that cable modems are the competition that would drive them to invest, but so far the only response I've seen from Verizon is a bunch of ads telling how much worse cable modems are, while their service is the same price but slower, and not even available for my apartment. (6-year old construction, too... not like we were in an old neighborhood or something.)
Either way the legislation goes for the bells, I doubt their customers have to worry about seeing broadband any time soon.
My parents live in Kansas. Way out west where the only way to actually get technology was to form (gasp) cooperatives. That's right, apparently the anti-communist propoganda 50 years ago failed to disuade the locals from setting up cooperatives to share the technology for all. Granted at first they only shared phone lines (the so called party lines). What does this cooperative get them these days? Well it got them DSL 2 years before my appartment in Manhattan had it. Rates are as good as I've seen anywhere and since its a cooperative, everyone gets a check once a year or so with a refund. Check out the local telco united www.ucom.net. See any lack of service there? Any exorbitant prices? Nope, didn't think so. Granted, some people might want to go with SBC -- maybe they see a pretty ad on TV or something and really want to switch, but when it comes down to it -- and your next door neighbor works for the local phone company, the people of Kansas know what side their bread is buttered on.
"I honestly don't know if that proposal is the best solution, but if it comes down to splitting the Bells versus local governments seizing control of the last mile...as a customer, I'd prefer the former over the latter."
We've already in the middle of former. AT&T and Bell were the same company, but the courts split them up between multiple local carriers and multiple long-distance carriers. Here's what's happened so far:
AT&T: "Hey, this long-distance stuff is great! Even with the new competition, we're still making money hand over fist! I'm glad I don't have to deal with money-losing local service any more!"
Baby Bells: "Damn! I want in on that long-distance stuff, too!"
Government: "Too bad. There was a reason we split you up."
Baby Bells: "Please?"
Government: "No."
Baby Bells: "Pretty please?"
Government: "No."
Baby Bells: "Fine. I'll just hold my breath and not upgrade anything, leaving the country using decades-old technology on the local loops. See if I care."
Government: "Upgrade."
Baby Bells: "No."
Government: "Upgrade."
Baby Bells: "No."
Government: "UPGRADE!"
Baby Bells: "Only if you let us get in on the long-distance action. Alas, we're afraid that it's just too expensive otherwise..."
Government: "... Oh, alright. But on one condition: You have to let other businesses compete with you on the local loops. By leasing them your equipment."
Baby Bells: "Huh? What the heck are you smoking?"
Government: "Take it or leave it."
Baby Bells: "Fine. But we won't like it!"
(a few years pass)
Baby Bells: "This whole leasing business sucks ass. Why the hell do we have to let the competition use our stuff, anyway? The worst is that we have to do this crap with the new 'internet access' thing as well. Every time we upgrade the network, our competition gets access to the same upgraded network we do. To hell with it, we'll just not upgrade."
Government: "Europe is ahead of us in broadband. Upgrade."
Baby Bells: "No."
Government: "Canada is ahead of us in broadband. Upgrade."
Baby Bells: "No."
Government: "South Korea is ahead of us in broadband. Upgrade now, dammit! Hell, you haven't even upgraded from the last time we had this argument!"
Baby Bells: "Only if you let us keep a monoply on the broadband services. Alas, we're afraid that it's just too expensive otherwise...
Government: "What you talkin' 'bout, Willis? What part of 'Telecommunications Act of 1996' are you having trouble with?"
Baby Bells: "Oh, we know we need to be opening ourselves up to competition. And we're really trying, too! But do you think there's a way where we can open ourselves up to competition and... well... you know... not?"
Government: "I don't know... Will you really hold up your end of the bargain this time?"
And that's where we are today. The problem with the model you're suggesting is that the two monopoliess you'd end up with would still be corporations and still be beholden to shareholders more than their customers, and it's always more profitable for them to extort their customers than to cater to their customers' needs. One of the ventures will be more profitable than the other, and the loser will lie, cheat and steal until they're able to compete in the more profitable areas without relinquishing their existing monopolies. You can go ahead and split ILECs into hardware ownership and service providing corporations, but that division of functions between the two will be all but gone in thirty years, leaving us exactly where we started back in the 1960's: A corporation abusing it's monopoly powers in one field to stifle competition in another, with the ultimate losers being the customers.