Tech firms push for less regulation of broadband

WASHINGTON – With the economy in the doldrums and the tech sector feeling the pain, Intel Chief Executive Craig Barrett has enough on his plate in Santa Clara without a messy regulatory battle in Washington.

By Heather Fleming Phillips
Mercury News Washington Bureau

But Barrett, Chairman Andy Grove and other top company executives have crossed the country on a series of trips over the past year to send a personal message to the Federal Communications Commission — ease up on regulation of broadband networks, or risk throwing the tech industry and the economy as a whole into further turmoil.

Intel is part of a coalition representing 15,000 tech companies that’s on a mission to spur investment in the fast, high-capacity networks. Their enemy: a complicated morass of decades-old regulations designed for monopoly phone networks. Intel, Cisco Systems, Microsoft and dozens of other tech companies say those regulations are a disincentive for the largest local phone companies to invest in broadband networks. The high-tech industry has responded with an unprecedented lobbying blitz at the FCC, hoping to persuade the four-person commission to free broadband from those restraints.

Broadband connections to the Internet hold the promise of rejuvenating the sector, sparking innovative new technologies and driving sales for companies that make network building blocks, personal computers and software. Universal access to those high-speed, always-on networks also would benefit consumers by as much as $500 billion, according to a study by economists Robert Crandall and Charles Jackson.

“Everyone understands that getting some serious movement in deploying broadband is critical to restoring growth in our industry,” said Cisco lobbyist Jeff Campbell. Right now, the tech sector is in a vicious cycle. Content-rich applications aren’t being developed because few people have the high-speed connections needed to use them. Yet, consumers aren’t signing up for broadband in part because of the lack of new applications.

Another hindrance is price. As competition for broadband takes hold, the monopoly local phone companies say the price for broadband service — typically $50 or more a month — will come down, spurring more consumers to sign up.

FCC review

FCC Chairman Michael Powell last year made promoting broadband one of his top priorities, and pledged to quickly re-examine the regulations to determine where changes should be made. He has stated his preference for keeping nascent technologies free of old-style regulations, though he needs the support of two other commissioners to move forward. FCC officials expect the commission to complete its review within the next few months.

The battle over broadband falls along traditional industry lines, with the monopoly local phone companies including Pacific Bell parent SBC Communications in one corner, and the long-distance phone giants AT&T, Sprint, WorldCom and upstart local phone companies in the other.

The tech industry, at first, mostly watched from the sidelines. But as the telecommunications sector began to crumble, the leading tech trade associations joined the Bells in their effort to scrap regulations for broadband service. Among the faltering companies, the Bells stood on the firmest financial footing and held out the best hope for near-term investments in broadband networks.

“The collapse of long distance left the Bells as the only strong client base going forward,” said Scott Cleland, managing director of Precursor Group, an independent policy analysis firm. “Their futures are joined at the hip.”

Under attack is an FCC requirement that the Bells lease pieces of their phone network to new rivals at discounted wholesale rates, including equipment they use to offer digital subscriber line, or DSL, broadband service. The Bells are trying to persuade the FCC to throw out that requirement for new technologies, arguing that it leaves them with no incentive to invest. They argue: Why spend the money to develop these broadband connections if competitors can reap the rewards by leasing the equipment at steep discounts and reselling it under their own brand name?

“For the old wire, old rules should apply. For any new fiber that’s laid, the new rules should apply,” said Business Software Alliance President Robert Holleyman.

It’s also an issue of fairness, they say. The local telephone monopolies are getting trounced in the marketplace by cable TV companies, which offer broadband service but don’t face the same regulations as the phone companies. The most recent FCC data showed that only about one-third of the U.S. households with high-speed Internet service got it through DSL.

There are 15.2 million broadband subscribers in the United States, according to ARS, a La Jolla-based technology consultant.

“We have dramatically scaled down any further deployment of DSL,” said SBC Senior Vice President Jim Smith. “We couldn’t make a good business case to go forward.”

Competitors’ case

But AT&T and other competitors to the Bells say the tech industry has missed the mark by siding with the Bells. Scrapping those regulations will only make it more difficult for fledgling companies to invest in new technologies and develop alternative broadband networks, they say.

The Bells are being disingenuous in their lobbying effort, said AT&T’s chief Washington lobbyist Len Cali.

“Broadband isn’t what they’re after. They’re after deregulating everything, most significantly their voice services,” he said.

Tech ramped up its lobbying effort in April, assembling a coalition of six industry trade associations. Its members covered the breadth of the tech industry, from chip makers and telecom equipment manufacturers to software and hardware companies.

They’ve pitched their views through four detailed legal filings, and paid dozens of personal visits to FCC commissioners, their staff and agency lawyers.

The efforts could be paying off. Senior FCC officials say tech’s involvement has broadened the debate beyond the typical industry in-fighting.

“It’s not just a telephone battle, but an issue about the economy, investment and growing the high-tech sector,” said Link Hoeing, Verizon assistant vice president for Internet and tech policy issues.
Contact Heather Phillips at [email protected] or (202) 383-6020.

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