Everyone Taking Sides On ISP Redefinition

It seems Michael Powell, chairman of the Federal Communications Commission,
isn’t happy with the current definition of an Internet service provider
(ISP), and announced
in a meeting Thursday afternoon
his plans to define broadband ISPs as
“an information service with a telecommunications component.”

While the FCC’s notice of proposed rulemaking (NPR) isn’t even
public yet, with those seven words Powell touched off a firestorm of debate between
telephone companies, ISPs, competitive local exchange carriers (CLECs) and
the organizations that represent each of them.

In a recent study conducted by the FCC, regulators found 98 percent of the
most densely populated Zip codes have at least one high-speed Internet
customer, while less than 40 percent of rural Zip codes have even a single
high-speed subscriber.

To bridge that digital divide, Powell wants to ease “the regulatory
constraints that hinder investment in rural broadband deployment.”

Powell is confident the current status of the telecom industry will rebound
in due time and when that time comes, he said he wants the regulatory
framework in place to spur investment in the technologies and services that
will drive broadband Internet growth.

“The concern has always been, in the high-speed Internet broadband space,
that the regulations generally developed for telephone carriers over
the century might be inadvertently applied to advanced services,” Powell
said in an interview with Lou Dobbs of CNN’s Moneyline Thursday evening.

The four incumbent local exchange carriers (ILECs) Verizon Communications , SBC Communications , BellSouth and Qwest
Communications would likely benefit the most from a FCC shift in regulations.

Despite success in rolling out DSL in their regions, the Baby Bells have
had a difficult time with their bottom line. Both Verizon, which
lost $2 billion in 2001
, and Qwest, which
reported $516 million in net losses last quarter
, had a
less-than-stellar 2001.

Powell’s goal is to bring confidence back to the telecom sector and
encourage more investment.

“What we’re trying to do is propose some rules that clarify those
obligations and make clear what the regulatory environment is,” he
continued, “quell the uncertainty and risk and provide some stimulation by
lowering regulatory costs for the construction and building of those
networks so consumers can begin to see the promise of the service, rather
than continue to hear the rhetoric about it.”

Scott McCollough, a telecommunications lawyer with Austin, TX-based Stumpf,
Craddock, Massey & Pulman, said that while most NPR’s never end up where
they start, the tone set by the FCC is more than just a little troubling.

He cautioned the NPR hasn’t been released yet so a definitive answer isn’t
available, but the wording used by Powell seems to suggest the FCC will try
to strike out, among other things, the Telecommunications Act of 1996
provision that allows competitive access to the telephone company’s
unbundled network elements (UNE) for competitive local exchange carriers
(CLECs).

With UNE’s, CLECs are able to provide broadband services, like DSL, on
their own. If that provision goes away, McCollough said, telephone company
competitors might as well call it a day and go home.

“If that’s what they’re trying to do, then in one fell swoop, the FCC will have done
two things: They have wiped out the independent ISPs and wiped out the
CLECs,” he said. “Way to go. Are we now going to reserve Internet
services to the cable and telephone companies? And if so, what does that
mean for customer choice and the usefulness and utility and benefit of the
Internet? Trust me, they don’t really care about John Q. Customer, only
John Q’s dollars.”

While Verizon declined an interview request for information until after the
NPR has been released, SBC Communications released a statement to the
press shortly after the FCC meeting Thursday, congratulating FCC and vowing
to work with it in the future to address these “challenging issues.”

“The objective should be to ensure that providers of the same services are
treated equally.
Under the current patchwork system, the growth and availability of
broadband services is threatened by the increasing regulatory disparity
between providers of competitive broadband services,” SBC’s statement
read. “Increased broadband investment would not only add much needed jobs
and billions of dollars to the U.S. economy, but would mean new
technologies to deliver more broadband services to more consumers, at
better prices.”

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