Avoiding the Bell’s ‘Death By a Thousand Cuts’

DALLAS — Ask an Internet service provider (ISP) owner whether he or she has picked an easy business to get into, and if they don’t laugh you out of the room, the most you can expect is a rueful, ‘Yeah, right’ response.

ISP leaders from throughout the U.S. at the ISP Business Expo Tuesday afternoon got together to figure out how to deal with the four incumbent local exchange carriers (ILECs) — Verizon Communications , SBC Communications , Bell South and Qwest Communications — and how to survive.

Dave Robertson is president of STIC.net, a Texas-based ISP providing dial up and digital subscriber line (DSL) services to several communities. He likens the relationship between ISPs and the Baby Bells to a man looking across the room and saying, ‘Ah, there’s my future ex-wife.’

“Your future with the ILECs will end badly, it’s just a matter of making enough money and getting market share before it sours,” he said. “Understand, it’s an adversarial arrangement we have and it’s not a question of if it will go bad, but when.”

Robertson, and many other ISPs, go through competitive LECs (CLECs) for their copper lines whenever possible, but even then all parties involved know there is only one owner of the telephone network — the four Bells.

Broadband only accounts for 10 percent of the total number of Internet users today, most of it coming from either DSL or cable Internet modems. Fixed wireless and satellite-based Internet are still fledgling technologies and account for only a small market-share in the broadband arena. With the Federal Communications Commission labeling cable an “information service,” that leaves only DSL as a viable high-speed service for ISPs.

While the Telecommunications Act of 1996 might have made competitive access to telecommunications services with the Bells a reality, it doesn’t mean they are going to make it easy, according to ISP advocacy organizations.

Gene Crick, executive director of the Texas ISP Association, said when dealing with the Bells, it’s important to understand their actions aren’t based on keeping ISPs and CLECs happy and wholeheartedly supporting the Telecom Act; it’s based on keeping one bloc of customer happy: the shareholders.

“If we realize these people (working at the telephone companies) were hired to bring a return on investment (ROI) for their shareholders, you can get a handle on where they’re coming from,” he said. “If some grandma has sunk her life savings into a Bell’s stock, that Bell is responsible for making sure she gets a dividend.”

Many ISPs fault the telephone companies for a decline in the independent ISP industry. Only two years ago, Robertson said, there were about 7,200 ISPs, today that number hovers around 5,400. While a glut of ISPs in one market or acquisitions and mergers can account for most dropoffs, getting the short end of the stick when it comes to negotiated contracts is also to blame, said one legal expert.

Speaking at the ISP convention here, Scott McCollough, a lawyer specializing in telecommunications law for ISPs and CLECs, said that anyone looking to repair a strained relationship should just forget it.

“(The Bells) will always look at you as the competition at the same time you come to them as a customer,” he said. “That’s why the Bells throw two of their best weapons at (ISPs), the ‘death by a thousand cuts’ or full-blown nuclear attack.”

Examples of the death by a thousand cuts include Bell technicians accidentally missing truck rolls with ISP customers or showing up and trying to convince them to switch to the telephone company for service, McCollough said, while a nuclear assault involves telephone companies setting a $35 per month fee for an ISP reselling a DSL line (fee established by the FCC) while charging its own customer $36 a month for DSL.

McCollough said ISPs need to document every business dealing with telephone company officials, from support calls to contracts, while Crick said getting the cooperation and support of the local community is equally important.

“Organizations like the Chamber of Commerce know that local ISPs bring tax money and other benefits to a small town, while the Bells take the money straight out of the town and into Wall Street,” Crick said. “You’d be surprised how many people don’t like the telephone companies.”

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