Personal Communications Industry Association September 1999
Volume 1, Issue 4

IN THIS ISSUE

1 FCC Considers Building Access for New Broadband Networks

2 Letter from the Editor: What I did on my summer Vacation

3 BroadSides: Feedback from our readers

4 At the Commission: Hogan & Hartson's Michelle
Farquhar and David Sieradzki argue that broadband
service providers must recognize and seize the
opportunities presented by the FCC's reform of the
Universal Service program.

5 NTIA: The Digital Divide Continues to Grow

6 Upcoming Events

7 In the Business: With the interest in broadband
continuing to grow, how will the continuing battles over
open access and building access play out, asks Judith
Hellerstein in a special to Broadband Alert?

7 BroadView: a look at trends and forecasts in the
wireless broadband industry

15 Guest Editorial: This month, former WB Chief Dan
Phythyon explores how the Internet is transforming our
society and challenging our courts, legislatures, and regulatory bodies.
 
 

Broadband access to the Internet continues to be mired in conflict even though the Federal Communications Commission's (FCC) decided at the end of January 1999 not to force TCI or other cable operators to unbundle their networks. Congress, in response to heavy pressure from lobbyists and interest groups, has held hearings on the type of actions necessary to spur the creation of broadband networks. The fight over cable unbundling and other broadband access initiatives is far from over, of course.

A forced unbundling of the networks would slow down the migration to broadband access as the battle moves to the courts, thereby jeopardizing the expected consumer benefits and delaying the creation of broadband networks. Similarly, the fight by broadband wireless companies for equal access to facilities and space in MTE buildings is also far from over.

 Chairman Kennard encouraged cable operators to ask the FCC to step into the Portland dispute to determine the power of these local governmental authorities to enact regulations affecting broadband access. Kennard correctly predicted that chaos would develop if any or all of the 30,000 local franchising authorities or other government regulators decide to adopt their own standards for broadband access. Government regulation of broadband access would introduce uncertainty into the markets and would likely lead to a drying up of investments and capital into this area at precisely the time that fixed wireless carriers are on the threshold of rolling out broadband access across the U.S. Today most Americans do not have broadband access. Additional regulation, instead of spurring the growth of broadband access, will likely have the opposite effect, stymieing the growth of investment and of Wall Street enthusiasm for broadband access.

 Today, the market has a degree of certainty and investment dollars are easily obtainable by firms who have solid business plans for deploying broadband access. Not only is investment flowing to small firms and to companies holding LMDS licenses won at auction, but also technology companies such as Cisco, Sun, Motorola, and even large IXCs such as Sprint and MCI WorldCom have begun pouring money into fixed wireless. The future is extremely bright for all fixed wireless carriers including the once moribund MMDS companies, whose plans for broadband access never took off because of regulations, lack of capital, and lack of available equipment from manufacturers. These MMDS operators are being rejuvenated as Sprint, MCI WorldCom, and others are providing these companies with the access to capital, relationships, alliances and distribution networks that they lacked before. The moves by Cisco, Sun, and Motorola show the crucial role of fixed wireless in the race to rollout broadband access to all Americans.

In late-May/early-June 1999, Cisco and Motorola announced the formation of a new company specializing in LMDS technology and distribution: SpectraPoint. They intend to spend $1 billion over five years. Motorola has also joined with Sun Microsystems in developing the equipment that broadband wireless companies need. Moreover, since March 1999, Sprint and MCI WorldCom have been snapping up MMDS operators in what has become a major bidding war in the fight to obtain their valuable spectrum. MCI Worldcom plans to use its MMDS spectrum to provide high speed broadband access to small and medium sized businesses, while Sprint plans on using its spectrum as an integral component of its [ON network (The ION network will offer high speed Internet access, telephone, and data services, such as video conferencing, to businesses and home offices). In June 1999, Qwest purchased 19% of Advanced Radio Telecom, a fixed wireless operator, for $900 million and recently Liberty Media bought out the Associated Group's 41% ownership in Teligent. The impetus for all these companies' actions was to gain access to a wireless broadband distribution system, which is a more cost effective and quicker way of rolling out broadband access.

 Any forced unbundling of these "networks" would slow down the migration to broadband. Similarly, the fight by broadband wireless companies for equal access to facilities and space in MTE buildings is also far from over. Many of the FCC Commissioners strongly support the rights of fixed wireless operators to gain equal access to a building's infrastructure (including rooftops and riser cables) and rights-of-ways, but are hesitant to act because of they fear they lack clear statutory authority to impose building access rules and just compensation standards on building owners.

It is unclear whether the FCC has clear statutory authority to force cable networks to unbundle their networks, with some claiming that the FCC's only authority stems from Section 706, while others asserting that the authority results from a merger approval process. The main fear is that any action will be challenged in courts, and that as a result of these battles, not only will consumers be denied the benefits of broadband access in the short term, but also court delays and unclear regulatory oversight and rules will introduce much uncertainty into the markets drying up capital.

Likewise, it is unclear whether the FCC has clear statutory authority to force cable networks to unbundle their networks or to impose some national regulation or guidelines. Many claim that the FCC's only "unbundling" authority stems from Section 706, while others claim it results from a merger approval process. The main fear is that any action will be challenged in courts, resulting in protracted legal battles. As a result of these battles, not only will consumers be denied the benefits of broadband access in the short term, but court delays will introduce much uncertainty into the capital markets.

Congress is also looking at the issues of cable unbundling and of broadband access, but although it has held several hearings on the subject, it is unlikely to take any action on either. The basic question vexing Congress is whether in writing the Telecom Act, it intended for the FCC to create two, even three, frameworks for regulating what essentially is the same service-Internet access and service? And if it did, what are the ramifications of this action. Congress seems to tacitly endorse the perpetuation of two conflicting regulatory structures, mostly because it presents the best way of introducing competition and choice for local service. Cable telephony represents the best chance most residential customers have for competition in local exchange service. The cable companies have stated that any actions that result in a forced unbundling of their networks would impair their ability and erase any incentives to offer local exchange service to all Americans.

There are no easy answers to resolving the thorny and complex policy issues surrounding Internet access through cable. Asymmetric regulations hurt all carriers wanting to offer broadband access as they favor one regulatory framework-cable--over another. Each side appears to be drawing battle lines, with no side ready to budge. The FCC also appears to be hesitant to act as regards cable unbundling, mostly because it has not figured out the entire game plan and how its actions may affect the future deployment of broadband access to the Internet. However, recent actions by local franchise authorities might force the FCC's hand before it has a clear idea of the ramifications of its actions on the future of broadband access. The result of any FCC decision could permanently slow the deployment of broadband networks and hinder the goal of bringing affordable broadband access to all Americans.

In contrast, the FCC has a better understanding of the challenges facing broadband wireless in gaining equal and

There are no easy answers to resolving some of the thorny and complex policy issues surrounding Internet access through cable. and no one is ready to budge for fear of tipping the balance of power The FCC. Meanwhile appears to be hesitant to act as regards cable unbundling. mostly because it has not figured out the entire game plan and how its actions may affect the future deployment of broadband access to the Internet.

non-discriminatory access to MTE buildings precisely because they closely resemble traditional wireline competition issues. The NPRM on competitive networks should resolve some of the uncertainty as regards non discriminatory access to facilities and space.

 A final decision on cable unbundling is far off. The FCC Commissioners had hoped that the various industry players would work this out, with the FCC acting as a referee. However, the decision by the Portland local franchising

The FCC has a better understanding of the challenges facing broadband wireless in gainingequal and non-discriminatory access to MTE buildings precisely because they closely resemble traditional wireline competition issues. One can only hope that the FCC will find a way to resolve the inherent tension between protecting the values that have grown up under past regulatory regimes; the stated goal of the Telecom Act to bring choice for local telephony service: and its policy goals of promoting competitive and technology neutrality.

authority and the Court's upholding of its actions has resulted in other local franchise authorities considering similar actions, forcing the FCC to take action to avoid chaos in the marketplace. One can only hope that the FCC will find a way to resolve the inherent tension between protecting the values that have grown up under past regulatory regimes; the stated goal of the Telecom Act to bring choice for local telephony service; and its policy goals of promoting competitive and technology neutrality. Otherwise, the road to broadband Internet access for all Americans will be a long and winding one.

 Judith Hellerstein is the President of Hellerstein & Associates, a research group specializing in market analysis, competitive intelligence, and regulatory analysis of telecommunications, broadband access, and wireless issues. Ms. Hellerstein has written extensively on telecommunications, competition policy, broadband access, and wireless issues both for clients and for trade and academic journals. She can be reached via phone at 202 333-6517 or email at judith@jhellerstein.com .