'Super-RBOCs' will drive competition of the future

By Thomas Nolle
Network World, 10/16/00

It was a tough summer for competitive local exchange carriers, what with falling market prices and increasing Wall Street concerns regarding the viability of the CLEC concept. Now it is time to ask if competition in local access is doomed along with the CLECs, and if so, how will this impact buyers?

The goal of the Telecommunications Act of 1996 that established local exchange competition was reform of our voice-oriented access network - the last mile. Congress and the Federal Communications Commission hoped eliminating the regional Bell operating companies'(RBOC) local exchange monopoly would produce innovation in local access and an explosion in what the FCC calls "advanced services" - digital loops operating at more than 200K bit/sec. If CLECs were the competitors the FCC had in mind, and if they are in as much jeopardy as they seem, then it's this access reform that would be at risk.

The latest FCC initiatives have encouraged the RBOCs to deploy new ATM fiber, remote-based DSL networks, but the ATM services of these networks are targeted at voice transport or non-qualify-of-service (QoS) Internet services. SBC Communications' Project Pronto delivers voice or Unspecified Bit Rate ATM - not QoS. This may satisfy residential users, but it doesn't address how advanced business services would develop, nor does it bode well for services such as streaming media.

The RBOCs aren't putting a high priority on these services because they lack regulatory pressure (businesses aren't voters), and local exchange players don't have a big piece of the largely interlocal access and transport area business data market. The interexchange carriers (IXC) do, and the theory behind the telecom act was the RBOCs would be released to provide long-distance services, including data services, once they'd opened their access networks to competitors - we're back to competition.

The solution is almost counterintuitive: To ensure competition, we must quickly let the RBOCs into the long-distance market. The reason lies not in technology issues, but in solid business politicking.

Holding the RBOCs out of the long-distance market has kept them from merging with IXCs to create communications monoliths that would be very interested in end-to-end business services. BellSouth and WorldCom were dancing toward something before the Sprint/WorldCom merger talks intervened. Now rumor has it that Sprint's interested in BellSouth. Regulators have been reluctant to approve IXC/RBOC mergers because the RBOCs weren't yet qualified for long-distance under the telecom act, but that prohibition will merely reduce the chances that IXCs will be able to talk merger while they're still strong enough to get a good deal.

This is important because the competitors of the future will be the RBOCs. The CLEC of tomorrow is someone else's RBOC, operating out of region, and the FCC has acknowledged this with efforts to force RBOCs into more direct competition with one another. How do we encourage these new super-RBOCs to _quickly modernize the access network? The answer is to ensure that they can offer as many services to their customers as possible. Regulators, don't withhold long-distance approval or entry into regional or national data markets: Expedite it!

An RBOC/IXC behemoth would have a sizable business communications base to defend from its hungry brethren, and would then be interested in access services with high QoS. If the IXCs' revenue continue to decline, their ability to strike deals with RBOCs will dissipate. When the regulators get around to letting the RBOCs into the long-distance market, and thus letting the IXCs into the RBOC merger-mania, it may be too late.

We're going to have three or four Super-RBOCs, all full-service versions of the old Bell System. The only question is whether these guys will be competing to offer traditional services or new and exciting ones. We can improve our chances of getting those exciting services by allowing the current IXC giants into the merger game, so end-to-end services from multiple players becomes the competitive play of the future. If we do nothing, we risk a service-limited, QoS-less access network.