Perspective: What would Joe Consumer say?

Even the most Panglossian optimist would find it hard to speak well of the Federal Communications Commission's sellout to the regional phone monopolies.

In a ruling earlier this month, the agency reclassified DSL (digital subscriber line) service as an "information service." This is about a lot more than semantics, because it gives phone companies a legal right to deny requests from rival Internet service providers to rent their lines.

If you're keeping score, put this one in the victory column for the Verizons and the SBCs of the world.

Independent DSL carriers had been entitled to negotiate a rate with the big carriers based on the number of lines being used. But it was an arrangement that did not sit well with the telecommunications giants, which chafed under a regulation they contended was unfair, if not simply counterintuitive. After spending billions of dollars to build a nationwide network infrastructure, why share the fruits of their investment with competing Internet service providers?

If you're keeping score, put this one in the victory column for the Verizons and the SBCs of the world.

On the surface, that's the kind of stuff sure to make libertarian hearts everywhere go pitter-patter. A very similar argument convinced the Supreme Court in its Brand X decision. This past June, the court ruled that cable companies don't need to open their networks to competing Internet service providers, such as Brand X and EarthLink. In writing for the majority, Justice Clarence Thomas offered a tortured reading of the law (

I do hope he proves me wrong, but it's hard to understand how any of this will foster competition. Independent Internet service providers, which rely on other companies' infrastructures to provide services to customers, are already struggling. And after the expiration of a one-year transitional period, during which the phone companies still must offer network access to ISPs, all bets are off. My hunch is that the big guys will simply tell their former lease customers to take a hike--or pay through the nose to re-sign.

Like so many purchasing decisions, choosing an ISP often boils down to a single issue: price. For example, Verizon's 1.5mbps service is already 10 bucks cheaper than a corresponding plan from EarthLink. If those two offers were dropped on your desk, which one would you choose? I know what I'd select--and I'm afraid most of you would do just the same.

Biography
Charles Cooper is CNET News.com's executive editor of commentary.

More Perspectives

[dam7ri]

Joe Consumer wants to know...

how much the phone companies paid to buy the government and how much would it cost the American public to buy it back?

By regulating radio and TV content so heavily, the FCC says that it needs to protect us from broadcasters, but who will protect us from phone and cable companies?

[Earl Benser]

Time for some facts.

not emotions. First the FCC leveled the playing field for Telcos
and cable companies. Neither can be FORCED to open their
network to competitors. But, any competitor can negotiate a
deal, which is exactly what Earthlink has done and will continue
to do. Maybe the price will go up, but it was too cheap in the
beginning.

The mom-and-pop ISp's may be in trouble, but that's
economics. Nobody cried when the mom-and-pop drug stores,
and grocery stores, and hardware stores, all lost out to Walmart,
et. al. That was life, and so is this.

As far as the forced access goes, I well remember MCI's use of
similar rules to develop it's phone system on the cheap using
AT&T and the local Bells essentially as subsidies. And we all
know what MCI turned out to be - major corporate fraud, at
more levels than the courts have seen so far.

So save the tears. The only real competitors are the telcos and
the cable companies, and they each have their own networks.
Already, I have seen that competition generate improved access
speeds, with more speed and maybe lower prices coming in a
month or two. The mom-and-pop ISp's have already been left in
the dust.

The US developed one hell of a fine telephone system with
essentially no competition at all (except via the local PSC). Cable
companies run in franchise zones without competition (except
from DirecTV). Both provide quite credible service for the most
part (Qwest may be an exception). And both services are
improving.

I'd say that an oppressive interpretation of laws has just been
eliminated by the FCC. It may not be a perfect decision, but it's a
long leap in the right direction.

[CNerd2025]

!competition == shoddyService

Here in Hampton Roads, VA we have Cox Communications. The monopoly system is terrible. One can get Verizon DSL or Cable internet, but both are monopolies. My cable service sucks. At least twice a week my cable internet will not work. It will not send requests or receive headers, just sit there and blink with nothing going on. The phone system works, but DSL around here is worse than Cable.
To the columnist, I happen to be libertarian, and this does not make me happy. I like competition, because with true competition, good service takes hold, and government service is unneeded.

Nobody cried? I sure did

"Nobody cried when the mom-and-pop drug stores,
and grocery stores, and hardware stores, all lost out to Walmart, et. al. That was life, and so is this."

Are you serious? Many of us have values greater than just money.

My ISP neatly subtracts out whatever problems I have with the "common carrier" SBC. Therefore, for what I pay, I get net zero problems. When SBC kills them, I'll be looking for a new ISP and there won't be one.

And you better do two things:

1. broaden your definition of "value" beyond just $$$, for example, include the value of customer satisfaction.

2. recall that the infrastructure is heavily funded by taxpayers.

We'll have a return to the Cable TV scandals, except they won't be calling it a "scandal", just "pure economics": "we don't care because we don't have to".

Facts

I guess the fact that the Telecom Act of 1996 stated that the phone companies could offer long distance after they opened their networks to competitors would be something you may have overlooked.

You state examples of Wal-Mart eating Mon-and-Pops. That is NOT good for the economy. 80% of job growth comes from small business. When was the last headline that announced big hiring? Oh, that's right, the telcos have shed 100,000 jobs in the last 2 years and will shed 40,000 more with the pending mergers, even as they shift customer service and level 1 tech support jobs overseas. I forget, how is this good for our economy?

Oh, yeah, now that DSL is an information service, less taxes are collected, which should help all those budget deficits we see at the muni, state and federal level. And those job losses mean less economic stimulation and less taxes.

We already have a service economy, but soon you will be working for just one of the Fortune 1000, since they will be the only companies left.

[omaryak]

We need more regulation, not less

Though you are correct competition exists between telcos and cable for Internet dominance, the problem is that you are ignoring the 1996 Telecommunications Act and the deregulation of the telephone industry that was supposed to open the door for more competition. With these new rules that allow telcos and cable companies to shut out small independent operators, we will be left with less competition than envisioned under the 1996 act.

Yes, MCI turned out to be corporate fraud, but that is unfair to all the other operators (Sprint?) that provided competition using the same lines where competition would otherwise not have been possible.

I see that companies are wanting to get the greatest return possible from their investments in new lines and technologies by having exclusive or near-exclusive access to these lines, but this is the first time in our history we are entrusting the development of such a major part of our infrastructure to corporations beyond the input of the average Joe via the government.

When AT&T built its phone lines, it was a government-regulated monopoly, and the government required a universal access fee be charged (which we are still paying) to connect rurual areas. Today telcos and cable companies are under no such obligation when it comes to high-speed connections, and ultimately it is rural customers who will lose out with the new rules.

Sure, these companies argue that with exclusive access to lines they are more likely to connect rural customers, but only through government regulation are we guaranteed that rural customers will be connected.

I think government needs to take a more active role in promoting competition and expanding service, rather than throwing up their hands and allowing these corporations unlimited profit without any obligation for them to live up to their promises.

[hardedge]

Charlii, you've gone horribly bad over the years...

Let's see, an activist judge is someone who upholds the law... "The law's the law, but that doesn't mean it's necessarily good for consumers." So we break the law if we deem it is in our better interests? Great news for those 15 year olds who want to tie one on, or that 46 year old who just has to have that 13 year old girl...

Didn't you realize how silly that sounds after you wrote it? Next you'll be telling me that the Constitution guarantees us a right to privacy!

[R. U. Sirius]

Wrong again Buckwheat

> Let's see, an activist judge is someone who
> upholds the law..

Bzzt, I'm sorry, wrong answer, but we have a great parting gift for you: a copy of the US Constitution. In it you will learn that the job of the Supreme Court and the Federal Courts are to UPHOLD the Constitution, not the law. You will learn that judges are supposed to be "activists" in the sense that they are a check and balance to the other two branches of government.

Suggestion: quit listening to talk radio and Fox News and go to the library and read about YOUR government, not the one Rush paints for you.

[bobdonohoo]

Activist Judges?

Why would anyone believe that Justice Thomas would NOT be an activist judge? Maybe the answer to our concerns about many of the seemingly arbitrary decisions of activist judges in Telecommunications is simply to have less government involvement altogether. I don't see where "government created" competition by regulation has helped anyone but the government itself. Maybe we should let "natural" competition have its place in Telecommunications.

get rid of all regulations

i agree that the marketplace is currently being hurt by excessive government regulation. i propose that effective today all regulations for the phone companies be abolished. starting today, everyone will have the right to start their own phone company, everyone will have the right of way to install cable into people's home, and everyone will have the right to set their own phone rates. oh, wait, if we did that the local phone company monopolies would vanish. on the other hand, perhaps some government regulation is a good thing...

[petermpham2003]

Good idea ...

It sounds pretty a fair game. BTW, who are "everyone" who got the $$$ to run all those
wirings ? ... Not the poor me, certainly.

[lsander153]

All our best constitutional scholars...

... are working as commentators for technical web sites. (But even so, they should keep their political views to themselves.)

This FCC decision is good for consumers!

The job of a small company is to find a solution

This FCC decision is good for consumers!

The job of a small company is to figure out the
solution to a problem on its own (without government assistance). The companies with the righ solution (VOIP, Wi-fi, broadband over power lines, etc) will thrive. Competition from these new technologies will lower prices. The big Phone companies are very nervous about some of these technologies. They will spend a lot of money trying to keep up, if they are not force to give away thier network to competitos. This money goes to create new jobs at small companies with the right solutions. Look at the stock price of the telcom suppliers and manufaturers under the current line sharing rules (Lucent, Nortel, etc). Terrible! Nobody will invest in a network that they have to give away.

[droy99]

What would Joe Consumer Say

Charlie:

Since the cable companies are classified as an information service and don't have to share their lines, why should the phone companies? I have never thought this was a fair practice.