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SBC Hit with Antitrust Lawsuit
mrtaco01 writes "Four Internet service providers have filed an antitrust suit against SBC Communications, alleging that the Baby Bell unfairly inflated wholesale prices for high-speed Internet access."
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I think this case could have a big precedent if the plantiffs win.
It could mean that your installed DSL line could have several different choices of ISP's instead of just the ISP officially supported by the telephone company, which will lead to price competition and eventually monthly pricing more akin to dial-up pricing (e.g., US$20 to US$22 per month unlimited access).
Is this not to say that other independent ISP's shouldn't follow suit and file against Verizon who does the very same thing? I ended up paying over $80/mo. just because of Verizon's ability to "make the line DSL ready" at $42.00 a month. What a joke!
We lived about 15000 ft from the CO, and we wanted DSL. We called them, and instead of saying "GFY", they said they'd look into it and call back.
One day later, they said we could get it. Turns out, we were the first, i repeat, FIRST in that whole area for DSL. They installed a DSLAM and got rid of 2 load coils on the lines. All that for a piddly 30$ a month for a 1 year contract.
I'm usually against inflation praticies, but the cost has to come from somewhere if they're going to solve the last mile problem.
Yes, I live 8 miles away from the local city, and there's a CO near there serving OC-3 to local companies.
I live in Chicago, prime SBC territory where SBC (nee Ameritech) is fighting for higher wholesale prices for all resellers of their connectivity and dialtone, claiming they (SBC) can't compete. My home is served by an ISP out of Seattle, who finds it profitable enough to offer me great prices on a twice-resold DSL (SBC ==> Covad ==> Speakeasy.net) and a 1-year contract almost up. These other ISPs are crybabies, or trying to enter SBC markets too late to compete. Fire their MBAs and hire some that have a better penchant for marketing and planning.
SBC/Ameritech in Illinois recently was granted a huge rate increase by the State. This is on rates charged to other phone companies for their lines. Strangely enough they DID shortly thereafter announce new DSL service to some relatively rural areas...but then again, we have not gotten any closer to real competition yet.
I have to side with SBC on this one. As a former telcom employee, DSL prices were offered a cost to compete with cable. The recent price drops are due to reduced equipment costs.
I find it amazing that the wholesale rate on a T1 line is $50 a month! Customers still pay what $300-500? It's probably cheeper for some companies to set up shop as a CLEC just to buy resold lines for their business.
Competition is a good thing, but some of the regulations are a joke.
For smaller ISPs to flourish they need to offer something the Big Boys (ie SBC & co) do not, perhaps better customer support, or some sort of Value Added Service. Competing on price alone will get you nowhere
ILECs (Incumbent Local Exchange Carriers) own the 'Last Mile' and other giants (Verio, Level3, etc) own the upstream pipes. Between paying for the upstream access and the co-location costs at the Central Office, I don't see how anyone even expected to compete with SBC and other ILECs in the DSL business.
SBC does not even make a profit on DSL, they just hope that over the long run they don't have to upgrade any more of their plant, and can continue to sell the same (slow) DSL service for $50 a month. Recurring revenue will let them break even in the long run.
Small ISPs should charge more, and offer more at the same time. Upstream firewall service, or anonymous file swapping, or extra good spam filtering or some sort of extra content available only to subscribers.
More is more. Smart consumers will pay more for expanded and better service.
That having been said, from the viewpoint of a customer getting DSL from a 3rd party ISP back then, I wasn't too impressed with this, primarily because it caused the formation of ASI (which I think stands for "Advanced Systems Inc.") ASI was the ILEC holding company formed to handle the DSL circuits themselves, and its creation caused a severe increase in the delay of DSL installation, and these delays went on for at least a year.
The second issue I was aware of back then was exactly what these ISPs are complaining about. At some point SBC decided that the resale price for a DSL line to ISPs would be (surprise!) exactly the same as what they charged individual customers for basic DSL (with ISP) service at the same speed.
My ISP wasn't too happy about this, but they really died because they got "hosed" after they were bought out by a CLEC. Another ISP in the area, TexasNet, wasn't too happy about it either, but didn't get rid of DSL until SBC decided that it would remove one mode of billing, I think the one that let SBC pass the charges through to the ISP (the other being having the charges go onto the customer's phone bill).
These days I get my DSL through SBC, fast and reliable but expensive (6Mbit), thanks to being near a Remote Terminal. I depend on them for nothing but a pipe, and have made a point of ignoring their stupid SBC/Yahoo nonsense. In fact, the only ISP service I can't and don't do myself is NNTP.
--
"Open source is good." - Steve Jobs
"Open source is evil." - Microsoft
It's also known as leveraging a monopoly to expand it.
But since Microsoft effectively gets off scott free for doing this, SBC has probably decided they can probably get away with it too. Unfortunately, as noted elsewhere, SBC is in a regulated market, and Microsoft is not. This may be an interesting case to watch.
You never know...
In many (most?) cases, SBC is reselling their lines at a loss, considering that they are still the ones that have to maintain the line. The states have a pretty strict control over how much SBC can charge for lines (being the ILEC and all) and most states have kept that at a low rate. (Illinois is about $16, I think). SBC would probably be happier with it if the ISPs were also paying to have the lines maintained.
I work at an ISP that resells SBC DSL. The problem is, we are paying $34.95 for each DSL line to a customer. SBC is turning around and selling DSL for $29.95.
As if this weren't bad enough, we have documented cases (but not enough money for a lawyer, yet...) of our customers being contacted to switch a week after they turn up with us. You see, we have to enter customer info into SBC's database to place the order.
And speaking of SBC's database, did you know that it returns different copper distances for SBC vs. the ISP? We have had customers whose loop was not qualified for service be contacted by SBC a couple weeks later and be able to get service.
All the telco's abuse their power, but SBC is one of the worst.
-- Sent from a computer.
I'm moving into SBC territory next month, and the same situation exists here in Texas. Essentially, if I want to use another ISP, I have to pay that ISP a monthly fee and a separate line charge to SBC. But if I sign up with SBC, the combined line/ISP charge is the same as the line charge to go with someone else. So I can spend $30-$60 on the line charge and another $20-$40 to stay with my ISP, or just that $30-$60 to use their ISP. As much as I like my current provider, the financial incentive to switch is too great. But that still smacks of predatory pricing on the part of a monopoly.
SBC's not the only one that does this, of course. I work for another RBOC (though not in the telco or ISP areas) that does virtually the same thing. Evidently either my understanding of deregulation is flawed (the data services (DSL) unit must charge all ISPs the same, including their own) or the RBOC ISPs are really netting $0 after the line charges. Somehow I don't believe it's the latter.
"You can never have too many elephants on your team."
Agreed, but there are other issues here: a lot of the lines were run with government subsidies. Bell didn't pony up all of the original expense. So anyone trying to run competing lines would have to bear the entire expense of doing so, which is more than Bell had to do (in some cases), which also makes it prohibitively expensive.
So in order to break the monopoly, you have to force Bell to let others sell service over their lines. It's ugly and frustrating for companies like SBC, but it's what the government chose to do.
Now, if it were up to me, I'd sell those physical lines to the government, or spin off a company that is there simply to run and maintain those lines. This would be more or less like any other public utility. Then, companies wanting to put services on those lines (including the original Bells) would have to pay fairly to use them. None of this government price fixing crap.
A DSL line is, by definition, also a plain old telephone line. Is it's maintenance fundamentally different than if it where just your average, everyday phone line? If not, then as long as someone has an SBC landline (ie. 95% of the population in SBC territory), then they already ARE paying for line maintenace.
And the idea that SBC is selling DSL lines at a loss is dubious at best. The R&D to develop DSL was paid for in the late eighties / early nineties via special permission from congress to raise telephone service rates in order to develop interactive television, and in fact, they had promised to deliver it to some large percentage of the population, so you could also argue that a certain amount of field equipment and upgrades has already been paid for, too. The installation of lines was paid for a hell of a long time ago. And the upgrades to digital switches has been mostly in order to save them money as demand increases; the benefit for DSL is ancillary, and thus those switches are also already paid for by telephone subscribers.
The DSL reseller is presumably providing the DSLAM, so where exactly is SBC's loss? Is it like one those studies IBM did way back when that determined that it would cost them $40 to develop and ship an empty box?
A company with a monopoly can only think in monopoly terms. The idea of competition is alien, and unwanted, and the longer a company was had a monopoly, the more ingrained those ideas are.
Same thing with Covad and their resellers. I work for a little ISP out in the middle of no wheres california. We tried reselling covad DSL but the pricing for US was 30 dollars more a line then what Covad themselves were offering the lines. What goes through customer minds... "Why should I pay you 100 a month when it only costs me 70 a month directly with covad?" The other big issue is when you resell for covad, YOU are responsible for tech support, they will not talk to end customers only to the reseller. SO when a line goes down, customer calls us, then we have to call covad. doesn't sound too bad execpt you end up being on hold for 1-2 hours with covad. The other really buggy thing is they wont even talk to you unless you are on site. so all and all it is totally not worth it to resell DSL at a gain of 30 a month when they are underselling you at the same time.
not sure if this is what sbc is doing but I really would not be surprised.
feh