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DSL Prime News: Intel vs. Tauzin-Dingell

DSL Prime notes that Intel has articulately opposed the Tauzin-Dingell bill and askss why the telcos continue to lobby for its passage in the House even though it's dead in the Senate.

by Dave Burstein DSL Prime [October 1, 2001]

Intel opposes key Tauzin-Dingell rule
Broadband must run at a meg or more for video
Intel wrote "The FCC has a broad and ongoing obligation to promote the deployment of advanced telecommunications capability, which is defined as 'high-speed, switched, broadband telecommunications capability that enables users to originate and receive high-quality voice, data, graphics, and video telecommunications using any technology.' (emphasis added). ... transmission of video requires higher speed access than is available to most households with current generation broadband access. The true benefits of broadband will require that a critical mass of users have high-bandwidth broadband. Only then will we see the virtuous cycle of innovative applications, followed closely by increased broadband demand."

Peter Pitsch and Robinanne Stancavage, in Intel's 706 filing, echoed DSL Prime's pitch since 1999: DSL has to be more than a fast way to download e-mail. In particular, TV replaced print for most families news and entertainment a generation ago, so video must be part of the package. Canada has already recognized that, defining broadband as beginning at a meg. The current U.S. standard, 200K in both directions, is not "advanced services"—as Intel argues—that's already badly out of date.

DSL Prime is particularly glad that Intel has spoken so forcefully on this topic, because the Tauzin-Dingell bill defines "The 'high speed data service' means any service that consists of or includes the offering of a capability to transmit, using a packet-switched or successor technology, information at a rate that is generally not less than 384 kilobits per second in at least one direction."

384K is of course too little for a screen of streaming video, while the word "generally" is especially pernicious. People don't want to watch—or buy—video with unpredictable dropouts, inevitable in a network excessively over-subscribed or lacking well-engineered QoS, but that's precisely what "generally" allows. Video instead requires a rate that is "reliably" a practical minimum of about a meg. The "in one direction" is another attack on the Internet, which implies by its very name a connection that is not all one way.

Pitsch goes on to call for a new FCC proceeding, to clarify the rules, as we do in our editorial below. He's a Reagan-era FCC official, who wrote a paper Eliminating the FCC: The Telecom Revolution, An American Opportunity, so it should be no surprise he calls for complete elimination of unbundling requirements.

He also argues that two companies are sufficient for effective competition, citing the AMD/Intel fierce fights that have driven down prices. Telecom is clearly different, of course, with this year's perverse broadband price increase clear empirical evidence that the few remaining competitors are effectively signaling their price intentions, and coming to a result similar to what monopoly pricing would represent.

Most analysts think AMD's Jerry Sanders is a fool to compete with Intel so fiercely, and we've no reason to believe Mike Armstrong, Ivan Seidenberg, or their peers would sacrifice profitability in a similar way.

Editorial: Give the telcos fairness
Larry Babbio of Verizon says the government is treating the telcos unfairly in determining the prices set for competitors. The TELRIC pricing system determines the incremental cost of providing the service, including a modest return on the investment. Telcos are particularly unhappy with the uncertainty of what the charges will be, because they have to make capital investments and calculate the return over 4-5 years. There's also the question of the implicit return, which has only a small risk discount, and other details that add up to significant sums in the long run.

The bills in D.C., especially Tauzin-Dingell, do far more than this, including perniciously excluding video grade service over the Internet, any regulations on quality, or any practical way to prevent pricing that makes competition impossible. We actively oppose the bills.

The smart money in D.C. says T-D House passage has been bought and paid for, and will be used to send a message to the FCC on regulations. That would explain why the telcos continue to push in Congress, even with likely Senate opposition.

That strong arm shouldn't be necessary, especially with Mike Powell strongly dedicated to eliminating unnecessary regs. Telcos are, however, entitled to reasonable regulations. In Washington next week, I'll be asking how to effectively give the telcos some certainty. Comments and pointers welcome—it looks like time to open an FCC proceeding, preferably restricted to narrow questions.

We are journalists, not investment advisers; invest at your own risk and do further research.

Copyright 2001 Dave Burstein.
The DSL Prime Newsletter is reprinted with permission.

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3. Intel vs. Tauzin-Dingell