Strategic Window: New Edge: The Bell Shell Game: Old Lies, New Ruses

An Opinion Piece by Allegiance Telecom

"Today, after the FCC has given the Bells the broadband relief the wanted, the Bells say they will not invest in they technology. Why? Because the FCC did not end UNE-P." --Allegiance Telecom's Mark Stachiw

The Bells got the broadband relief they wanted from the Federal Communications Commission's Triennial Re-view, but they are up to their old tricks -- telling old lies and using new ruses to fool state legislatures.

First, the Bells promised to open their markets to competition if the FCC allowed them into the lucrative long distance market. With the FCC's green light on long distance, the Bells then promised to invest billions in broadband if federal regulators stop requiring them to share broadband upgrades to their networks. Today, after the FCC has given the Bells the broadband relief they wanted, the Bells say they will not invest in the technology. Why? Because the FCC did not end UNE-P.

This is the century old Bell shell game and it doesn't stop in Washington. The Bells are taking their game on the road hoping state legislators will do what Congress and the FCC have refused -- completely exempt the Bells from broadband regulation and stop state public utility commissions from crafting rules responsive to local market conditions. In fact, they are on the march in a dozen states to kill local competition and regain their monopoly once and for all.

The Bells are proposing state laws to deregulate local competition despite often-remarkable market penetration variances. In competitor-friendly Texas, where the PUC says there is 15 percent market penetration by competitors, SBC Communications Inc. is on the move. A bill drafted by SBC has been filed in the senate and its lobbyists are combing the lower house for sponsors. Meanwhile, SBC has retained more than 100 lobbyists in Texas to move the remonopoly bill to law, including top strategists fresh off the governor's triumphant election campaign.

In Indiana, where there is only 7 percent penetration, SBC has proposed a law to destroy competition by prohibiting state regulators from adding any unbundled network elements to the list, changing TELRIC rules to eliminate favorable pricing, and denying competitors access to facilities useable for broadband. Luckily, the governor said he would veto this "perfect storm" legislation. But SBC, with deep pockets of monopoly money, still is pushing this law with its legions of lobbyists.

The Bells also are working in Connecticut, Kentucky, Michigan, Missouri, Nevada and Tennessee, and more to kill local competition state by state. Even more troubling, many of these states, like Indiana, have single-digit market penetration by competitors. Clearly, the Bells' battle plan is to fight in states where competition has gained a beachhead while concurrently pushing competitors back into the sea where they have yet to succeed.

The Bells tell legislators that, without the law, they have no incentive to invest in advanced services. SBC actually holds the promise of broadband like a gun to legislators heads, declaring: "Deregulate, or else." Luckily, they also are building a record of deceit to inform the debate.

In 1999, SBC promised to invest in Oklahoma if their remonopoly bill was passed. After the bill became law, SBC announced drastic layoffs and cancelled state expansion plans. That's why a Kansas House committee rejected a similar bill and its chairman warned Bell lobbyists not to move another. That's why state representatives aren't lining up in Austin to introduce a companion to SBC's bill in the Texas State Senate. And that's why Oklahoma State Sen. Stratton Taylor says the Bell's "bait-and-switch" tactics misled his colleagues.

Like state PUCs, state legislators are growing wise to the Bell shell game. And as they scrutinize the bills, legislators are discovering many aspects that are just plain wrong, including: The pending bills preclude local regulators from tailoring the rules to local competition just when the FCC has recognized that the states are in the best position to make the appropriate granular determinations demanded by the Telecom Act of 1996.

The bills stifle innovation, a hallmark of competition. In broadband for small businesses, competitive carriers like Allegiance Telecom have been innovators and the Bells have been reluctant followers. The monopolists left technologies like integrated access services and DSL unused for years until competitors arrived. After initial resistance, the Bells deployed copycat products and used their monopoly power to squash competition. Once competition faded -- such as DSL -- the Bells raised prices and limited availability.

Regulatory relief is not needed to spur network investment. The Bells' have an inherent incentive to deploy fiber; it costs less to build-out and maintain new fiber networks than to just maintain expensive existing copper networks. The bill's real intent is remonopoly.

It is hoped state decisionmakers know the Bells always keep the shells moving. Like SBC's 1999 Project Pronto announcement, which said the new $6.75 billion network investment would "dramatically reduce its network cost structure. Expense and capital savings alone are expected to offset the cost of the entire initiative." Here's a challenge: try to locate the Oct. 18, 1999, press release in the thorough announcement archive on the SBC Web site. You can't. At press time, it had been mysteriously missing for months because SBC now pretends only deregulation will stimulate investment. But you can still find it at www.algx.com/shellgame.

Coincidently, Project Pronto's multibillion-dollar investment never materialized. So what will become of future Bell promises as they shift the shells in target states? Like their many broken promises, the hidden Project Pronto press release shows you cannot believe the Bells. State legislators and regulators must not fall for the RBOC's "old lies, new ruses" promises. As jilted policymakers in Oklahoma and D.C. will tell you, it's a game only the monopolists win.

Mark Stachiw is vice president and general counsel at Allegiance Telecom Company Worldwide. He can be reached at mark.stachiw@algx.com.

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