Sacramento Business Journal | Febuary 28, 2003 print edition | Kent Hoover and Mark Larson
The Federal Communications Commission’s new rules for telephone competition bring good and bad news for small firms.
The good news, according to small-business advocacy groups, is that the FCC preserved competition for local telephone service by continuing to force Baby Bells to lease network elements to competitors at state-regulated rates.
The bad news, they say, is the FCC reduced competition in the broadband market by freeing the Bells from limits on how much they can charge competitors for access to new high-speed lines.
This “will lead to higher DSL service prices and less broadband availability for small-business customers,” said Karen Kerrigan, chairwoman of the Small Business Survival Committee.
But telecommunications analyst Jeff Kagan said small firms could face a bigger problem as a result of the FCC’s decision: a “capacity crisis” for voice service.
The Bells will have no incentive to invest in their networks because they must give rivals access to them at below-cost rates, Kagan said. Competitors will have little incentive to build their own telephone networks.
“Everybody will piggyback on the Bell networks until they break,” said Kagan, an independent industry analyst in Atlanta.
In a year or two, the “all circuits are busy” message could become common, Kagan said.
This capacity crisis could be averted if states set rates low enough to allow Bell competitors to survive but high enough to encourage them to build their own telecommunications infrastructure, Kagan said.
Sacramento broadband consultant Tom Reiman disagreed. He sees the rules as giving the Baby Bells a green light to more broadband development.
“I’m optimistic that this will encourage greater investment in broadband,” said Reiman. “This doesn’t require them to open up their broadband networks. Now they shouldn’t have the constraints of selling broadband at a loss to someone else.”
Reiman sees DSL development by the Baby Bells as an initial foray into broadband that will eventually be dropped when the cost of fiber drops enough to make its replacement of DSL copper connections feasible.
Washington politics are certain to continue to roil on this issue.
Interested parties from a Verizon executive to an association of Internet service providers lambasted parts of the FCC decision, as did Rep. Billy Tauzin, a Louisiana Republican who chairs the House Energy and Commerce Committee, and FCC Chairman Michael Powell, who voted against his agency’s decision.
© 2003 American City Business Journals Inc.