Regulatory path leads back to the bad old days

Thank God for the cable companies. Yes, I know that sounds bizarre. But the June 10 decision by Solicitor General Ted Olson not to appeal a ruling on FCC local competition basically means that unless something changes, cable companies are the strongest positive force for telecom competition.

Back in March, the Court of Appeals for Washington, D.C., struck down a ruling by the FCC that gave the states authority to regulate unbundled network element pricing (UNE-P).

You'll recall that unbundled network elements are the bits and pieces of the physical network that the incumbent local exchange carriers (ILEC) have to lease to competitive LECs (CLEC) to let them provide broadband access. Regulating the rates effectively ensures that the CLECs can provide broadband profitably to customers.

To continue reading, register here and become an Insider. You'll get free access to premium content from CIO, Computerworld, CSO, InfoWorld, and Network World. See more Insider content or sign in.

Thank God for the cable companies. Yes, I know that sounds bizarre. But the June 10 decision by Solicitor General Ted Olson not to appeal a ruling on FCC local competition basically means that unless something changes, cable companies are the strongest positive force for telecom competition.

Back in March, the Court of Appeals for Washington, D.C., struck down a ruling by the FCC that gave the states authority to regulate unbundled network element pricing (UNE-P).

You'll recall that unbundled network elements are the bits and pieces of the physical network that the incumbent local exchange carriers (ILEC) have to lease to competitive LECs (CLEC) to let them provide broadband access. Regulating the rates effectively ensures that the CLECs can provide broadband profitably to customers.

By striking down the ruling, the court of appeals said, in effect, that it wasn't sure the FCC should be in the business of regulating rates at all. (This is a simplification, but that's the gist.) By refusing to appeal, the solicitor general threw in the towel and gave the court the last word.

Why does this matter? It's not a dumb question: Recent news analyses suggest that technologies such as VoIP have made the UNE-P discussion obsolete. Such thinking is wrong.

What's at stake here is who controls the broadband connections that make the delivery of services such as VoIP possible. Think about it: Nobody does VoIP over a standard 56K  phone line. To run voice and data concurrently, you need broadband connectivity - which typically means DSL or cable.

So here's why UNE-P is still relevant: If the RBOCs can charge whatever they want, third-party providers of DSL services will be forced out of business. That means the competition for broadband boils down to cable (and other broadband alternatives) vs. DSL. In effect, we're reducing the number of potentially competitive players from three (ILECS, CLECs and cable) to two.

I know I'm about to get deluged with e-mails complaining that the UNE-P rates are usurious and forced the poor little RBOCs to sell their networks at less than a fair market rate. Get real: If the FCC-mandated rates really had been that bad, why wouldn't SBC, Verizon and the rest have taken major advantage of the opportunity to gouge the competition?

If Verizon is forced to sell its circuits at below-market rates, that represents a windfall to SBC, Qwest and BellSouth - which are all ostensibly seeking the opportunity to compete with Verizon on its own turf. Yet they didn't because the truth is, the RBOCs don't really support competition.

The great thing about the status quo was that it let the RBOCs keep out competitors. UNE-P threw a spanner into the works and introduced true competition into the market.

Bottom line: If you like higher prices, longer waits for broadband and the slower rollout of services, rejoice. The rest of us can pray for the cable companies to have a great year.

Read more about lans & wans in Network World's LANs & WANs section.