Open letter to President-elect Obama: please don’t send the stimulus money to the telecom incumbents

According to a senior aide to House Speaker Nancy Pelosi, the federal government’s economic stimulus package will include investment in broadband Internet infrastructure and funds to upgrade and repair the national power grid alongside more traditional funding for road and bridge repair.

Already incumbents like AT&T are lining up for this money. Please don’t give it to them. That would be a huge mistake, even if conditions such as “net neutrality” are attached to the package. AT&T will just throw lawyers and lobbyists at Washington to obstruct true net neutrality and line-sharing. The FCC will spend too much time chasing after the incumbents.

Three things need to be done in the US to address the country’s lack of broadband competition:

  • The existing copper network of AT&T has to be opened up to competitors. Period.
  • Functional separation: AT&T and Verizon should be forced to separate out their network business from their service business.
  • Give the stimulus money to local governments which will lay and own the fiber networks, then they can open it up to AT&T and other service providers who want to deliver service — giving small local providers a huge price discount so that AT&T cannot outspend them in marketing.

All three are being done in the EU because European regulators have found out how difficult it is to enforce “net neutrality” and line-sharing rules against the incumbents. By the time a fine is imposed on the incumbent and the lawsuit is concluded, five years have passed and the original plaintiff, a small ISP, has long gone out of business.

The French regulator, ARCEP, was burned so many times by France Telecom’s anti-competitve actions that ARCEP is now leading the charge in Europe for open networks — it is advocating true functional separation and fiber duct sharing.

Recently, ARCEP concluded that one of the critical conditions for rapid deployment of fiber networks is a set of guidelines for operators, installers, owners and users to share the fiber local loop. It’s not surprising that France has gone from a broadband laggard to one where residents of main cities can get 50 Mbps symmetrical broadband service for under 50 EUR per month.

New Yorkers can’t even get that. So how are Americans in rural areas ever going to enjoy high-speed broadband at reasonable prices?

Comments

  1. Esme, I absolutely agree with you. Broadband infra-structure should be modeled on public amenities/utilities and should be open to any and all operators. Considering this you might be interested to learn that the Irish government has just awarded the contract for the nationwide supply of broadband to a mobile phone company. More here: http://url.ie/ysy & here: http://url.ie/ysz

  2. Dave Burstein says

    Right on target, especially since they will not provide more broadband in return.

  3. We’re seeing the beginning of what happens when the incumbents control the internet.

    – Terminating the internet account when a vague usage line has been crossed (Concast fixed that just this year from our pushing this issue to the public just this October)

    – Poor quality competition. Besides Concast and their 6/8/12 meg lines, the ONLY other option in my area is 1.5 Meg DSL. that’s it for competition unless you want SLOWER internet and go wireless.

    – One or two solutions in any area. This is competition? It’s like saying there is a variety of soda’s to choose from. You can drink coke or pepsi cola. But nothing else is available. This is choice?

    My family and friends who are tired of poor service and options are writing letters to President Elect Obama about this. We’re tired of being abused by the incumbent and want real change.

  4. Nick Foxall says

    Truth is most of Europes fiber optic network (especially Britain) was done by the private sector at great cost to the banks, early 90’s when technology was having huge amounts of money thrown at it. The bubble burst and if you look at Telewest in the UK (now owned by Virgin Media) their shares dropped 99% when that bubble burst, it costs way too much to lay a network just to be used by the public, it needs to be required by business, this is where telephony companies get there money from, hence why major citiues usually have the best deals.

    Big companies throw service at the consumer cheap just to add another customer to their end of year financial report.

  5. Yes, that’s it give the money to inept governmental bodies who mismanage money on a regular basis. All that municipalities have show is that they can use an unfair business advantage of using taxpayer dollars as seed money which they do not have to pay back only to create ill-fated services. On the other hand, communication costs have continually gone down over the years. All you have to do is remember what it cost to make a call 10 years ago.

  6. Hey bluesguy,

    As opposed to private companies that manage the money well? You mean: Washington Mutual, Countrywide, Citibank, Merrill Lynch, AIG, Ford, GM, Chrysler, Bank of America, who else am I leaving out? Oh yeah, overseas, the Royal Bank of Scotland, Fortis, Satyam, all of the banks of Iceland . . . all of which are private companies.

    By the way, can you explain to us why France, Germany, the UK, Sweden, the Netherlands and so many other countries have more competition in the market for broadband? Why is it that a resident of Paris can get 100 Mbps symmetrical broadband service for 50 EUR per month but his counterpart in NYC cannot?

    Not because the French government has given the city of Paris money to “blow” but because the French government — for all its so-called socialist leanings — has actually imposed rules that ensure there is competition. Amazing, isn’t it, those bloody European socialists actually seriously enforcing rules to ensure that residents enjoy the benefits of an open market.

    The French government, like many European governments, have imposed and enforced regulations that require their telecom incumbents to share their copper lines. Better yet, they forced the incumbents to share the fiber ducts going into buildings and to share fiber optic networks. In some instances, the governments have funded the deployment of FTTH (e.g. Amsterdam).

    The result is that these rules and investments have allowed other companies — yes, other private enterprises — to enter the ISP market and make money. Unlike the US, which does not enforce its antitrust laws, European governments actually believe in some kind of free, open market where a lot of private companies compete for your money.

    Another thing: what I have discussed here is for for local governments and states to build and own the underlying infrastructure, the fiber, and to open it up to all kinds of ISPs, not just the cable guy or the DSL incumbent, but other ISPs. In reality, most municipalities do not act as ISPs unless there is really no ISP in their community who will run the service. They get a local ISP to run the service.

    So what must happen is the separation of the infrastructure layer from the service layer, allowing different service providers to compete for your business. Isn’t that what the free market is all about?