Broadband Wars

By: Paul Riat - businessnewsupdate.com

Telco industry may have more at risk than cable

The Federal Communications Commission exempted, last week, cable companies delivering broadband Internet access from a law that requires telecommunications carriers to open their network to smaller competitors.

It is clear that in the St. Louis area Charter Communications "wins" under the ruling, but who loses? The ruling only increases tension in a four-way tug-of-war going on between cable broadband providers, teleco broadband providers, large telecommunications providers (Baby Bells) and local Internet service providers.

The ruling prompted Charter Communications to quickly drop a franchise fee on cable modems, but the real fallout from the FCCs decision won't come until regulators decide whether or not to give large phone companies a similar exemption to that granted the cable industry.

"Right now only those (broadband services) provided by telephone companies are regulated," SBC Communication spokesperson Selim Bingol told Business News Update. "We think it is important that everybody plays by the same rules."

If the FCC were to grant the Baby Bells an exemption for broadband they wouldn't have to allow digital subscriber line (DSL) providers like Covad Communications to use the SBC network at a discount. Typically, providers like Covad dish out DSL to ISPs like Earthlink, AT&T and Megapath in local markets under the ISPs brand.

FCC — No Help

Covad assistant general counsel Jason Oxman says he understands why baby Bells like SBC would want to get out from under the laws requiring them to open their network, but he says turning to the FCC won't help.

"As much as SBC would like the FCC to change their situation, it can't," he said. "The FCC doesn't pass laws - Congress does."

Congress requires the FCC to open up the phone networks for competition because the big phone companies started off as a nationwide monopoly. Cable companies aren't under the same law mainly because the industry got its start by several companies spread across the country.

Thursday's decision clarified the matter from the cable companies' point of view, but as a practical matter it is unclear whether any ISPs were waiting in the wings to pounce on their networks anyway. Companies already running DSL service would have had to pony up a big chunk of cash to integrate cable technology with their existing service.

Cable Unattractive

Speaking under condition of anonymity because he is not a spokesperson for his DSL reselling employer, one industry insider said if SBC somehow gets out from under the law requiring them to open their networks SBC won't likely boot everyone off their network. Instead, the insider says SBC will likely squeeze out resellers by charging them more for access while at the same time selling directly to ISPs. SBC already does business with some 600 ISPs across the country, directly selling them access to their broadband network.

Covad agrees that many DSL providers will feel the pinch, but Oxman says Covad will benefit if SBC somehow manages to dodge regulation.

"We have our own network and have access to local loops under statute," Oxman said.

Open Access

At Access US, one of the larger ISPs in the St. Louis area, president Victor Mattison says he isn't particularly concerned which service - or which technology - he ultimately uses to connect his customers.

"Our focus is not on any one technology," Mattison said. "We've been successful at (providing great services) by adapting with the market shifts and growth, not by trying to limit the choices of our customers"

Mattison says network exemptions are ultimately good for the market because they encourage competition while government regulations impede market growth and reduce the value offered customers.

The unnamed industry expert Business News Update spoke with, while discounting the importance of last weeks broadband cable decision, said that telecommunications companies are all keenly eyeing all decisions by the FCC and any teleco-related legislation coming from Congress. There's just too much at stake in either maintaining or breaking rules that bind large teleco companies. The tug-of-war isn't expected to end soon -- or gracefully.

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Paul Riat covers tech and biotech business news in and around Missouri for Business News Update.

E-mail him with story ideas or comments.