America’s looming crisis over local access

With facilities-based local competition unlikely to arrive anytime soon, CLECs are staking their future on the effectiveness of new rules that guarantee them open and affordable access to the incumbents’ networks. Canada is continuing to struggle with the issue and it’s still not certain that we have the rules right. Meanwhile, south of the border CLECs are predicting the remonopolization of the Bells if Congress passes new legislation (H.R. 1542) to amend the 1996 Telecom Act. They warn that the Internet Freedom and Broadband Deployment Act will radically undermine the basic principles of local competition. The Baby Bell competitors are lobbying aggressively for amendments to the proposed bill. Clark McLeod, chair and co-CEO of McLeodUSA Inc, a CLEC operating in 25 states, highlighted his concerns before the Senate Committee on Commerce, Science, and Transportation on June 19. Excerpts from his testimony appear below. H.R. 1542 has no redeeming qualities. It guts key equal access provisions of the ’96 Act and strengthens the Bells’ monopoly control over the local network.It does nothing to spur broadband investment in rural America. It is totally irrelevant to the Bells’ ability to provide DSL service. The Bell companies can and do provide broadband DSL service today. It substantially reduces the Bells’ incentive to open their local markets to competitors, by granting immediate authority to provide long distance "data" services. This bill created uncertainty, which cuts off CLEC access to capital. Consequently, I urge each of you to publicly oppose H.R. 1542. Local competition has developed much slower than long distance competition. The reason is that the Bell companies have successfully denied competitors equal access (both economic and functional) to their local network. Study LD and wirelessIn order to open up the local network to competition, we should review the successful models in the long distance market and the wireless market. Access led to competition, which led to lower prices and higher service quality for customers.The answer for local competition is to mandate equal access and enforce it. Unfortunately, there is not equal access today, either economic or functional. Economic equal access does not exist today, because competitors are not getting what they pay for. Competitors pay for 100% service from the Bells but receive far less. Consequently, competitors must receive damages to offset the costs they incur as the result of unequal access. Alternatively, the price competitors pay the Bells should be discounted. Functional equal access also does not exist. Competitors must be able to order, provision and service lines in the exact same way the Bell company does. A system is needed within a Bell company that does not reveal who the ordering company is, thus eliminating the ability to discriminate. Until that occurs, meaningful and progressive penalties must be assessed when the Bells discriminate. Separation of retail and network operations is critical to functional equal access. Separation can occur functionally within a company, which is the system Qwest is implementing. But, if meaningful separation does not occur, the regulator must have the authority and budget to structurally separate the Bells’ retail and network operations and must use it to accomplish functional equal access. Dire predictionsCompetitors, after spending billions of dollars, have averaged a 1% marketshare gain per year. If you extrapolate, there will be no one is this room still alive by the time we have meaningful local competition. And in fact, competition may die enroute. Congress needs to finish what was started in 1996 and take action now to mandate equal access and enforce it. The full text of McLeod’s testimony can be found here.

America’s looming crisis over local access

News | July 17, 2001

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