The candidates are blind to the optical market's soaring valuation, the wheezing capability of legacy networks, and the coming clash between the two industries.
BY STEPHEN N. BROWN
A t the Republican convention in August, George W. Bush said of the Clinton presidency: "This administration had its moment. They had their chance. They have not led. We will.'' In the esoteric world of fiber optics, Bush is right. President Clinton and Al Gore, who were both pro-fiber years ago, had the motivation and opportunity to shape federal policy and set the country on a path to a national door-to-door fiber-optic communications infrastructure.
In 1992, candidate Bill Clinton told Lightwave: "To provide an impetus to install a door-to-door network as soon as possible, I would as President set forth an attainable date for full implementation of such a network" (see Lightwave October 1992, p. 9). In 1991, then-Senator Gore wrote in Scientific American: "Present policy, which is based on copper networks, is hindering the deployment of new fiber technology. There is a policy gridlock...the interests that built and still run our existing infrastructure resist changes that might intensify competition...if we do not break the... deadlock...we remain mired in the past...The most effective way to break the stalemate would be to show the American people what fiber-optic networks could do for them."
But recently, the Federal Communications Commission unwittingly confirmed what most people have known for years, that such networks have never been a serious subject for the current administration. In February 2000, the agency issued a notice of inquiry asking for public comment on several issues, including whether the agency "should...encourage investment in fiber-to-the-home." The FCC has never received the slightest direction or encouragement "to show the American people what fiber-optic networks could do for them."
This is not the only evidence of Gore's abandonment of fiber. For example, not once in his seven-plus years as Vice President has he discussed fiber's superiority over copper and the good that local fiber loops would do for the country. Not once has the FCC launched a formal inquiry into the costs of replacing a copper loop with fiber, where cost estimates and system architectures would be brought into the open and examined for their credibility; Instead, the agency has lamely accepted a copper-dependent industry's claim that fiber is too expensive to be ubiquitous infrastructure.
Copper is still the main driver of Gore's domestic federal telecommunications policy, which seeks to preserve the copper infrastructure and tax it instead of replacing it. Therefore, it was no surprise last month when Gore picked up an important adviser from "the interests that...still run our existing infrastructure." Roy Neel has taken temporary leave from his job as president of the United States Telecom Association, the main lobbying group for the incumbent telephone companies, a post he has held since 1994.
Neel was Gore's chief-of-staff in the 1980s and early 1990s. In the past year, he has been bashing the FCC for its loop unbundling policy and recently wrote, "Local phone companies...are burdened by unfair FCC regulations that require them to share with competitors not only their current networks, but also their future upgraded networks... [sharing] make[s] it uneconomical for the phone companies to upgrade their networks for broadband services."
Neel's return to the Gore camp is sure to have a quid pro quo. Thus, a Gore presidency may have the FCC relax its unbundling policy, which requires the loop-sharing so despised by the phone companies; quietly stand aside as the incumbents keep buying out their competitors, as in the case of Verizon's purchase of Northpoint; and render quicker and favorable decisions allowing the incumbents to enter more and more long-distance markets. But none of these options will do anything to advance the fiber industry, which should not expect much change from the current national policy under a Gore presidency.
Unfortunately, Gore's neglect of fiber does not mean that Bush will be any better, judging from the composition of his "high-tech" advisers and the telecom policies he implemented in Texas. As governor, he signed into law telecom legislation that effectively blocked AT&T, MCI, Sprint, and municipalities from entering local communications markets and competing with SBC, the Texas-based incumbent that now owns over 60 million local loops in its own region, California, and the five midwestern states that compose Ameritech. AT&T and the other companies that were shut out of the Texas local market asked the FCC to preempt the Texas law. The agency did so but declined a similar request from the city of Abilene, saying the cities were political subdivisions of the state of Texas, which could treat cities as it wished. Bush is just as willing as Gore to preserve markets for incumbent phone companies.
Bush's slant toward incumbents also shows up in his "high-tech" advisers, a grab bag of big-name hardware and software makers, Internet businesses, policy experts, and advocates. Although the group is headed by the CEO of Dell Computer and populated by Silicon Valley executives, three less visible advisers are strongly aligned with the incumbents.
Peter Huber, a long-time consultant to the incumbents, is the author of the famous Geodesic Network and now advocates abolishing the FCC. Jeffrey Eisenach, the president of the Washington, DC-based Progress & Freedom Foundation, has a history of bashing the FCC's loop unbundling policy, while praising the incumbents' digital-subscriber-line technology (see Light wave, July 2000 p. 16). Scott Cleland, the managing director of the Legg Mason Precursor Group, spoke to the House Judiciary Committee in support of bills HR 1685 and 1686, which would have allowed the incumbents to offer DSL services across Interlata lines without the FCC's approval (the bills died in committee last month). Cleland has also been a harsh critic of AT&T's decision to restrict cable Internet access to @Home, an AT&T subsidiary and played a role in pressuring AT&T to commit in principle to open access, a process that has yet to be worked out. Of course, AT&T's cable network is one of the few formidable threats to the incumbents' DSL services.
With those advisers, Bush will go along with the current administration's policy of preserving the economic life of copper infrastructure rather than move the nation toward fiber infrastructure. The only contrast between the presidential candidates in this arena is that Gore will loosen the rope restraining the incumbents, while Bush will cut it. But both actions delay the day when optical door-to-door networks drive the economy, just as door-to-door electric and telephone networks once did.
The optical sector's importance to the national economy received back-hand attention from the Wall Street Journal, when it criticized Gore for linking Bush to "big oil." The Vice President has no advisers from the optical industry, thus the Wall Street Journal chided Gore for not understanding the new economy: "For one thing, you could fit 'big oil' inside Cisco's market cap these days and forget it's there."
The soaring valuations of optical companies require a continual building of sales and services, lest the devaluation that hit the dot.com companies will hit the optical sector. It needs an outlet; that's the motivation for Senate Bill 2698, "The Broadband Internet Access Act of 2000" (see Lightwave, September 2000, p. 20). Cisco, for example, is counting on an expanding market and did not buy Pirelli's optical division, Cerent, and other companies just to watch the incumbent phone companies wall off 150 million American consumers for the next 10-20 years.
John Chambers is Cisco's CEO and an adviser to Bush: Let's hope the GOP candidate is aware of the vast divide between optical and DSL networks and what each portends for the country's long-term economic growth. Bush can understand the strategic implications by taking to heart the words of George Gilder, once a speech writer for President Reagan and a GOP team member in perpetual good standing. Writing in the Economist, Gilder said of the incumbents' preferred technology, DSL: "The very same trumpets that blared ineffectually for 10 years for ISDN...now toot...for ADSL..., in strategic terms it is a distraction...A dying telephone technology clutches at a shiny new...death rattle."
Stephen N. Brown writes on public policy in telecommunications. He can be contacted by e-mail at email@example.com or telephone: (615) 399-1239.