Real Competition

Reader argues that structural separation is the only way to achieve true competition in the ISP arena.

[Response to Tauzin-Dingell Bill Good for ISPs from May 24, 2001.]

[May 29, 2001]

Dear Editors and Dave McClure:

I help run one of the largest independent ISPs for business in Chicago. I disagree with your assessment, and suspect that H.R. 1542 may not be good for ISPs. Even so, there may not be any great negative changes, either.

A much more considerate plan is needed to serve the public interest.

Why H.R. 1542 won't work
The penalties for ILEC misdeeds are limited to $10M combined. It has been proven these limited fines do not dissuade billion-dollar ILECs from acting in their best interests even when those are against the rules.

Deregulation does not address the core problem
Owning the rights-of-way, the lines and the central offices, the ILECs admittedly abuse their monopoly in the network infrastructure industry for an unfair advantage in the Voice and Data service industries.

Why the core problem has not been identified
The prior lack of clear definition in the ILEC's competitive landscape has contributed to the resulting power the ILEC's exert across it. In the past "Telco" meant local or long distance. "Telco" today has evolved into three distinct industries, and the ILECs compete fully in all three of them: Infrastructure, Voice and Data.

Voice and data carriers are not bricklayers
The business of establishing and maintaining physical network lines is a fundamentally different business than that of providing service over the lines. Accordingly, we should perceive that in leveraging their monopoly of network infrastructure for advantage in the Voice and Data industries, the ILECs harbor anti-competitive interests. If the ultimate goal is lower prices for consumers and businesses, I propose a change that will put all voice and data service providers on an even footing:

Force the ILECs to divest their physical network infrastructures.
The resulting infrastructure providers would be incentivised to improve their networks to compete against wireless infrastructure providers,thus not only lowering prices for Voice and Data service providers and their customers, but also driving innovation and improving quality of service.

The solution is not less government action.
Even though I can provide better quality of service and more variety, just because I "can" compete with the ILECs doesn't mean that it makes business sense to do so. For example, even if one can deliver it in better shape and more varieties, who wants to compete with the Sea for salt? The metaphor is apt because the telecommunications infrastructure, like salt, is a public resource. As unlikely as it is with this administration:

The solution is more government action.
The federal government should take action for the best interests of its people and force the ILECs to divest themselves of their physical, network infrastructure. Unlike deregulation, divestiture will contribute positively to competition and both goals of stimulating innovation and lowering prices.

Yours in Chicago,

Gray Rothkopf,
CEO, Forward.net