Jeffrey Krauss
By Jeffrey Krauss, Broadband Barracuda and President of Telecommunications and Technology Policy
There were two major Washington events in February 2002 that may produce big changes in broadband policy. First, the "Tauzin-Dingell bill" (H.R. 1542) passed the House of Representatives, but its fate in the Senate is uncertain because of strong opposition from Senators Hollings and McCain. But second, the FCC started a proceeding that might accomplish the same result as the Tauzin-Dingell bill, without changing the law.

The bottom line here is whether a telephone company that provides high-speed Internet access is required to resell the underlying DSL transmission capacity to other carriers and ISPs. This is like the cable modem open access debate, but applied to telephone companies. Under existing FCC policies, incumbent local exchange carriers (ILECs) must resell the transmission capacity, and must price it at discount rates. The Tauzin-Dingell bill would reverse that policy. And this new FCC proceeding could also reverse that policy.

The FCC proposes to classify wireline broadband Internet access as an "information service" that includes a transmission component classified as "telecommunications." So that means the DSL-based Internet access service is not a "telecommunications service." And it also means that the underlying DSL transmission is "telecommunications" but not a "telecommunications service." Got that?

A "telecommunications service" is "telecommunications" that is offered for hire to the public, and there are special statutory obligations that go along with offering "telecommunications service." In contrast, the obligations that go along with offering an "information service" with a "telecommunications" component were adopted by the FCC, and the FCC can change those policies. They were adopted over the last 30 years in three "Computer Inquiry" proceedings. The current policy that treats the underlying DSL transmission as an "unbundled network element" and requires that ILECs make it available for resale was adopted in 1986, way before anyone thought about broadband Internet access.

The ILECs argue that they do not offer DSL transmission as a "telecommunications service;" they offer it only as an element of Internet access, and they should not be required to make it available for resale. Cable companies make exactly this same claim regarding cable modem service–it is an element of Internet access, but not sold as a separate transmission service. This FCC proceeding is a step toward equal treatment of ILECs and cable operators.

Under current FCC policies, ILECs sell DSL transmission capacity to carriers that call themselves competitive local exchange carriers (CLECs), who then resell it for access to ISPs like Earthlink. These CLECs–companies like Covad, Rhythms and Northpoint–have done poorly in the marketplace. Some have gone out of business; some are still limping along. So the FCC, which sought to protect and nurture them several years ago, seems to have given up on them. Maybe it's time to accept the ILECs' arguments, set them free to compete with cable modem service, and take away their worry about giving away DSL transmission capacity at discount prices to CLECs. Sure.

In addition, this new FCC document raises some additional questions that could directly affect cable modem service. One question has to do with reliability. If you've noticed, neither your cable modem service agreement nor your DSL Internet access agreement makes any promises about quality of service. Guaranteed data rate? Forget it. Guaranteed latency? Right. Guaranteed limit on lost packets? Ha-ha.

But it is just barely possible that this proceeding could come up with policies on service quality and reliability for Internet access. In this new FCC proceeding, reliability questions are raised in connection with the FCC's national security and emergency preparedness obligations. In that context, you never know what new FCC policies might emerge.

And then there is the question of payments to the Universal Service Fund. Telephone carriers pay a percentage of revenues to subsidize service in high cost areas. Cable companies that provide cable modem Internet access service do not pay a contribution, because there is no offering of a "telecommunications service." The FCC is asking whether companies that provide Internet access over their own transmission facilities ("self-provisioning," they call it, and they specifically call out cable, satellite and wireless operators) should be required to contribute. I wonder how this will affect franchise fees.

Anyway, the main point is that the FCC is trying by regulation to accomplish the same thing that the Tauzin-Dingell bill is trying to accomplish–relieving the ILECs of their responsibility to resell broadband Internet access service. Consequently, there's a pretty good chance that in a couple of years, wireline DSL Internet access and cable modem Internet access will be subject to the same regulatory policies, either because of changes in the law or FCC policy changes, and the Internet access CLECs will be long forgotten.

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