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January 08, 2006

It’s Time to Worry About RBOCs

It’s time to worry that the remaining strong Baby Bells, having devoured their parents, will manage to further slow Internet usefulness in the United States.  Both our economic competitiveness in a quickly flattening world AND our future ability to access great content at blazing speeds are at risk.  Really.

The Baby Bells (once known as RBOCs for Regional Bell Operating Companies) have been a frightening lobbying force since they were spun off from parent AT&T in the 1980s.  But they were kept in check by the formidable lobbies of AT&T and MCI and, for the last decade, by a bipartisan series of Federal Communication Commisison Chairman including Democrats Reid Hundt and Bill Kennard and Republican Michael Powell.

The constraints are gone.  AT&T in now part of SBC, symbolically rebranded “at&t”, and Verizon snapped up the wreckage of MCI.  New FCC Chairman Kevin Martin has proven much better than Michael Powell at bringing the commission to consensus; trouble is that so far the consensus action seems to be to protect the RBOCs from competition or actually enhance their position.

The RBOCs are feeling their oats.  Even traditional media has been reporting their threats to charge Google, Vonage, etc. extra for Internet “priority”.  “Why should they be allowed to use MY (emphasis added) pipes?” asks at&t CEO Ed Whitacre. Clearly he’s not satisfied with collecting rents from those of us who rent HIS pipes.  He’d like to collect again.  Why shouldn’t he?  He charges “access charges” to people who call you long distance on the phone line you rent.  That’s one of the reasons, I’m sure, he doesn’t want Vonage or Skype on HIS pipes (or any other pipes if his lobbying can stop them).

Om Malik quotes Verizon CEO Ivan Seidenberg: “We have to make sure they don’t sit on our network and chew up our capacity.”

Then Om quotes Jeff Batcher, a BellSouth spokesman: “During the hurricanes, Google didn’t pay to have the DSL restored.  We’re paying all that money.”  Interesting that BellSouth doesn’t think we consumers are paying to have our DSL fixed when it’s broken.  Both these quotes are from this WSJ story, but Om’s post is worth reading on its own.

That leave only Qwest unheard from of the RBOCs.  Unfortunately, doesn’t matter much anymore what Qwest thinks; but at&t (nee SBC), BellSouth, and Verizon do matter: we need to worry about them.

You might well ask why it matters if Google has to pay something to reach us on the Internet.  After all, Google makes plenty of money.  Here’s why it matters:

  1. There is no workable scheme which would allow the many providers of the various parts of the Internet to collect properly from the content providers.  Should Google pay every ISP in the world whose customers use Google? How much?  Bellheads, please don’t point out that the old monopoly phone companies have clearing mechanisms so they could pay each other for every phone call (and make sure no one was UNDERcharging). Doesn’t work at the packet level and doesn’t work for voice anymore either.

  1. Even if Google could afford building relationships with every provider in the world, how would a smaller content provider – say a musician, a movie maker, or a blogger – arrange to pay whomever carries packets to her readers?

  1. This scheme would wipe out not only small content providers but also small ISPs who won’t have the leverage to compete for content prioritization dollars.

  1. Imposing UNWORKABLE schemes on the Internet would be just fine with the RBOCs because it IS slowly but surely eroding their monopoly positions.

  1. The rest of the world doesn’t have to do whatever the RBOCs convince the FCC to allow.  So Internet business, whenever they can, will both form and concentrate elsewhere.

  1. This attempt to collect from both Peter and Paul for the same service would not survive in a competitive market.  There is no such problem in the very deregulated UK, for example, where, Martin Geddes tells me, everyone has a choice of dozens of access providers.

Fred Wilson is still an optimist.  “Dream on,” he says to the RBOC scheme to collect twice for every bit.  But he may be too optimistic given both the loss of the countervailing AT&T and MCI lobbies and an Internet-friendly FCC.  I used to think that competition from the cable companies would be enough to stymie any action like this by the RBOCs.  I was too optimistic when I blogged that here.  It looks like the cable companies are waiting to see what the RBOCs can get away with.  Duopolies can be almost as effective as monopolies.

So what to do?  I’ll blog more on that.  Just as a hint, Jeff Jarvis blogs: “We desperately need competition in bandwidth, and that includes municipal efforts.”  He’s right.  We can’t count on the FCC (or any other government agency).  There clearly isn’t enough competition now, either in the market place or Gucci Gulch where the lobbyists hang out.

Another hint:  I posted that we shouldn’t buy DSL from Ed Whitacre (if we can help it) here.

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