Robert X. Cringely:

Last week, the U.S. Federal Communications Commission again bowed to the interests of the big telephone companies, and ruled that those telcos have no obligation to provide other Internet Service Providers wholesale access to their DSL networks.

While this might look like a death knell for Earthlink DSL, for example, and vindication for AOL’s and MSN’s decisions to drop their own DSL businesses, that isn’t necessarily the case. What IS the case, however, is that the decision has as much to do with telephone service as broadband, and the telcos are positively gleeful. Whether we consumers should be gleeful, too, isn’t yet clear, but the answer right now is, “Probably not.”

Let’s first look at the decision. The short version is that the FCC, seeing enough incumbent and emerging broadband alternatives to DSL (cable modems, power line, WiMax, and 3G cellular data) no longer felt that alternate ISPs had to be guaranteed access to the local phone company’s DSL plant. The ruling didn’t look at the DSL infrastructure, itself, other than to place it in this broader network and legal context and say there seems to be plenty of competition now.

Not in my town there isn’t. Here in Charleston, SC, my choices are BellSouth DSL which, as my 81 year-old mother put it, “sucks” (the first time I ever heard her use that term), or a Comcast cable modem, which is faster but brainless in that Comcast hasn’t done a very good job of provisioning Domain Name Service. Power line, WiMax, and 3G cellular are nowhere to be seen in my neighborhood, and so far aren’t even on the drawing board, either (I checked).

But through the Beltway glasses of the FCC, the nation apparently looks awash in broadband alternatives, so they gave the poor telephone companies this sorely-needed relief.

Here’s where I get really confused.

It seems to me that the telcos got their relief a year ago when the FCC — in an earlier decision — concluded that the companies didn’t have to share their next-generation networks with third-party ISPs. Fiber-to-the-home, fiber-to-the-curb, fiber-to-the-neighborhood, and even certain copper services like ADSL2 and 2+ were exempt from required sharing, leaving plain old original ADSL the only network they were required to share. The idea last year was that telcos wouldn’t invest in these new networks at all if they had to share them, so the FCC said they didn’t have to, with the goal that we’d all then get faster service. This, of course, completely ignored the existence of the same cable, power line, WiMax and 3G cellular infrastructures that today — only months later — are justifying the current decision.

So the telcos were first exempted from having to share their faster services in order to encourage them to build those services, which we sorely needed. And now they are exempted from having to share their slower service specifically because there are so many broadband alternatives.


Remember, “share” means “sell” or “rent” to the third-party ISPs for rates that are higher than I expected, and a lot higher than the telcos suggested. For all the talk of having to sell “at cost,” those agreements are profitable for the telcos, and we’ll see that proved next year when the agreements are generally renewed. You see, this new FCC decision didn’t prohibit telcos from reselling DSL, it just made doing so optional.

One thing that’s very true is the phone companies WILL shortly begin a frenzy of broadband improvements, but my belief is that this isn’t based on the logic stated to be at the basis of either of the two enabling FCC decisions. It’s based, instead, on the implicit result of these two decisions, which is a fundamental change in the way telcos are regulated.

The basis of utility regulation is that for the privilege of being allowed to have a monopoly, utilities have to accept obligations in the form of reasonable profits and additional public services. These privileges and obligations are supposed to balance each other. But what happens if you take away the obligations, as the FCC appears to be consistently doing? Then all that’s left is privilege.

What’s happening here is the telephone companies are getting parity with the cable TV companies. Last year, the FCC reclassified cable modems from being common carrier services — that is, COMMUNICATION services — to being INFORMATION services. The distinction here is critical, because a communication service is regulated while an information service is not. A communication service is like a phone company or a cable TV company, while an information service is like a Yahoo or a Google — except, of course, Yahoo and Google don’t own any wires. The cable decision was tested recently in the U.S. Supreme Court and upheld, with the ultimate result being this DSL decision.

More here.