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EarthLink: Telecom Reform Unnecessary

WASHINGTON -- If the Federal Communications Commission (FCC) decides to classify broadband-providing telcos and cable companies as information services, those firms could ultimately close their networks to competitors, an ISP executive warned lawmakers Wednesday.

And that, said Garry Betty, EarthLink's President and CEO, would turn the 1996 Telecommunications Act "on its head."

Speaking before a Senate panel studying possible telecom reform, Betty said enforcing current telecommunications law is more important than rewriting the 1996 Act. His position sharply contrasted with the testimony of Verizon Chairman and CEO Ivan Seidenberg, as well as Comcast President and CEO Brian Roberts, two executives who preside over major providers of DSL and cable modem broadband services.

"Today's regional Bell companies enjoyed a government-granted monopoly market for almost a century as they built out their transmission networks while [guaranteed] rate of return regulation ensured profits," Earthlink's Betty told the Senate Commerce Committee. "Cable companies like to talk about 'risk capital' but enjoy monopoly franchises."

Betty was referring to the FCC's 2002 vote that left cable broadband services largely unregulated, which was part of an effort to help spur investment and deployment of high-speed Internet access. The decision also prevents dial-up Internet service providers (ISPs) such as Earthlink from accessing the cable companies' broadband networks.

Last year, the FCC proposed a similar regulatory regime for broadband provided by the Bells. Under the 1996 law, incumbent phone companies are required to make their copper lines available to competing dial-up Internet service providers.

Both of the recent FCC decisions are being contested in the courts.

"Incumbent telephone and cable companies still each have 85 percent or more of the customers in their businesses and some 95 percent of all broadband DSL or cable modem customers, respectively," Betty said. "Yet competitors to these incumbent facility providers would, under the FCC's interpretation, have to undertake the impossible task of building their own last-mile network without any protection or subsidy."

Betty added that common carrier transmission services are the bedrock of today's information economy.

"The central issue in this hearing, several FCC proceedings and in any proposed rewrite of the 1996 Act would be the regulatory classification of broadband services," he said. "All Internet access services -- whether provided by an independent ISP like EarthLink, a telco affiliate like Verizon or a cable company like Comcast -- are information services."

But, Betty stressed, "let me be equally clear that all information services are, by definition, delivered via telecommunications, and the offering of such telecommunications for a fee to the public makes them telecommunications services."

Betty concluded that Internet access is an information service riding on top of a transmission component, which he said qualifies as a telecommunications service.

"If such services are no longer available to information service providers upon reasonable request on non-discriminatory terms and conditions, incumbents would be free to close their networks to any competitive providers, services or innovations," Betty said.

Verizon's Seidenberg, on the other hand, told the Senate panel that government regulations of broadband investments and Internet services are both "unnecessary and inappropriate." The 1996 Act, he said, was based on "old think" and outdated stereotypes of incumbent Bells as simply traditional voice providers.

"I would argue that the 'telecom industry' as we knew it is history," Seidenberg said. "In its place will be the 'broadband industry' made up of new, super-fast, multi-megabit networks that can deliver video, data and voice in entirely new ways."

The Internet, Seidenberg said, changes all the traditional concepts of telecom regulation, particularly citing the emergence of telephony services using Voice over Internet Protocol (VoIP).

"You don't need to own the pipeline to offer these services to customers," he said. "You just have to put your application and your content on the Internet, where customers can reach it over their broadband connections."

He called VoIP an application "that can be offered on the Internet and essentially bypass the carrier who has the pipe to the customer. So we're seeing a whole new challenge to the traditional definition of communications services."

Comcast's Roberts also praised VoIP, saying it will make cable a "ubiquitous facilities-based telephone competitor."

He also said Congress and the FCC should actively promote facilities-based competition.

"American businesses should put their energy and capital into building these new facilities and not into trying to regulate competitors," Roberts said.

"To those who don't get the message, I hope you will offer this advice: 'Don't just stand there -- build something!'"



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