Carriers put FCC public bandwidth request on hold

By Stephen N. Brown

Despite FCC Chairman Kennard`s wish for immediate delivery of bandwidth to the public, industry tells the commission that the real timetable is a choice between a "long, long time" and "never."

Bandwidth, the means of delivering low-cost, full-motion video and data services directly to the business and home, is achieving new prominence at the Federal Communications Commission (FCC). In the past two years, the agency held two different hearings on bandwidth, one in January 1997 and the other in July 1998. At the first hearing, Reed Hundt, then the FCC chairman, said, "We have some grasp that public policy is becoming increasingly important to the emerging industry of bandwidth delivery." At the second hearing, the current FCC chairman, William Kennard, remarked, "Bandwidth is the next great frontier in communications policy...wherever there is a demand, there should be bandwidth."

Unfortunately, in the time between the two hearings, there has been little progress in the delivery of bandwidth to American consumers, according to the statements of Intel`s representatives. At the first FCC meeting, Les Vadasz, a senior vice president at Intel, said, "I think that where we have to get very rapidly is broadband connection to the home.... That is critical now, urgent, and it`s not happening....We cannot buy a reasonable PC communication service. We merely piggyback on the telephone service and get a very inadequate connection." At the second meeting, Charles McMinn, the chairman of Covad Communications, said, "I came out of the PC industry. Covad is backed by Intel....I can tell you from personal experience that the future of the information age is in danger of being choked by insufficient network capacity....We could do more except for the obstacles put in front of us by the [incumbent phone companies]." Clearly, the PC industry is still at odds with the phone companies.

To solve the PC industry`s need for bandwidth, the telephone industry is deploying Asymmetric Digital Subscriber Line (ADSL) technology, which received ringing endorsements from several companies in January 1997. Pacific Bell`s vice president of local competition, Lee Bauman, said, "Our technologists...are working hard to come up with alternative arrangements....We have announced the rollout of ADSL."

Nynex`s director of science and technology, Jeff Waldhutter, said, "The challenge to our industry as a whole is to move toward broadband Internet....I think we have the technology....We have it in ADSL."

Bell Atlantic`s vice president for research and development, Pat White, said, "We are also planning to deploy ADSL2, which is a 6-Mbyte version of ADSL."

Even the FCC`s current guru on new technology development, Stagg Newman, who in January 1997 was representing Bellcore, said, "We`ll need ADSL." The emphasis on ADSL was carried into the July 1998 hearing by the head of U.S. West Communications` Data and Internet Division, Joe Zell, who said, "My goal [is to]...bring low-priced, high-speed, high-bandwidth services to all of my marketplaces....I have now deployed in the last six months, into 223 central offices, ADSL capability."

Clearly, ADSL is considered by the FCC and the phone companies a major technology for delivering bandwidth to the public. Given this emphasis, imagine the impression that Zell made when he challenged the FCC: "From my standpoint, what`s important here is that we`ve gone as far as we can with this...ADSL deployment. I cannot afford to go any further."

Unlike all the other local phone company representatives in the January 1997 broadband hearing, Zell explicitly linked further deployment of ADSL with his company`s entry into the long-distance markets, currently off-limits to the regional Bell operating companies, the main providers of local service in the United States. Zell said, "I`m not allowed to build an Internet backbone....The current set of...restrictions...serve the voice long-distance market....I`m forced to go live within LATA boundaries and pay interexchange carriers....You are putting me in a position where I can`t serve the customer because I cannot lower my costs enough...I just want to beg you to consider the real economic benefits to the consumer of enabling me to carry out further deployment of this [ADSL] service."

Zell`s conditions came at a time when the Bell companies were pushing for a distinction between voice services and data services. The companies argued that Section 706 of the 1996 Telecom Act, which calls for "deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans," implicitly drew a distinction between voice services and data services, thus allowing the local providers to offer data services in both local and long-distance settings. Zell`s comments drew a response from FCC Commissioner Susan Ness, who said to him, "You seem to suggest that there`s no earthly way that you`re going to be able to provide the services but for inter-LATA [long distance] relief." She then asked the audience, "Can anyone, lawyer or nonlawyer, point to anything in the law or legislative history that suggests Congress used the phrase `network[s]`...to apply only to voice, not data?" Apparently no one provided a satisfactory answer. Rather than buying Zell`s argument, the agency is proceeding with docket FCC 98-188, a rule requiring each Bell company to use a subsidiary if data services are offered in long-distance markets.

Zell, unhappy with the subsidiary approach, said, "The suggestion that the solution [is] a separate subsidiary... completely defeats the purpose." He was supported a few weeks later by the president of the United States Telephone Association, Roy Neel, who complained about the subsidiary as "one more example of the [FCC] seemingly determined to keep a stranglehold on these companies."

But the companies may have more to worry about than just setting up a subsidiary. FCC docket 98-188 will require that "an incumbent local telephone company...interconnect its data network with the data networks of competitors...subject only to considerations of technical feasibility." This raises the possibility that in the near future the Bell companies` advanced intelligent networks, known as SS7 networks, will have to interconnect with Internet networks now being developed by such companies as Level 3, headed by James Crowe, the former chairman of MFS and WorldCom. Level 3 organized a group of switch and router manufacturers to develop standards and hardware that allow for interconnection and completion of long-distance calls between the two networks.

Despite Crowe`s emphasis on long-distance markets, in July`s hearing he told the FCC, "Today...there is one essential facility. That`s the copper loop. Not ADSL, not advanced services, not trunking, not switching, not long haul....The loop is not in a condition today to accept advanced services....Today`s broadband is tomorrow`s narrowband...so we`ve got a long, long, long period of time before we deliver the kind of bandwidth people demand. In theory, it`s nice to say that everyone has access to those loops, but the facts are they need conditioning, and lots of it."

Crowe`s timetable for the delivery of broadband services was seconded by Steven Ghrust, vice-chairman of Winstar, a competitive local-exchange carrier offering wireless services. He told the agency, "On the issue of timeliness, I`d say you have two choices, long and never....If you really want [bandwidth delivery] in a permanent cost-effective way...it will be a very long period of time. If that period of time is not sufficiently managed, it will become never."

Essentially, Crowe and Ghrust were telling the FCC that there is no alternative to the local loop and that the country has to live with it for several years. That opinion may be spreading through the agency. In the Aug. 6 meeting, when the agency announced the opening of FCC 98-188, Commissioner Gloria Tristani seemed to echo Crowe`s ideas when she commented on the need for rules governing "loop conditioning, bridge taps, and collocation." Each item she mentioned is a vestige of the local phone companies` ancient and exhausted local loop. If the FCC`s public policy is going to focus on upgrading an outdated technology, then the agency should simultaneously devise "technologically neutral" policies to have the loop replaced with fiber optics or some other truly broadband technology. A dual policy track can do no harm and will provide an alternative to that "long, long" wait for broadband delivery.

Stephen N. Brown specializes in market research and public policy toward new technology in the telecommunications industry. He can be contacted at tel: (615) 399-1239.