[Date Prev][Date Next][Thread Prev][Thread Next][Date Index][Thread Index]
CPT on FCC Interconnection Proceeding
- To: tap-info@tap.org
- Subject: CPT on FCC Interconnection Proceeding
- From: James Love <love@tap.org>
- Date: Fri, 31 May 1996 12:48:44 -0400 (EDT)
-----------------------------------------------------------------
TAP-INFO - An Internet newsletter available from listproc@tap.org
-----------------------------------------------------------------
INFORMATION POLICY NOTE
May 31, 1996 - FCC Interconnection Proceeding
There were the CPT reply comments in the FCC "Interconnection"
proceeding. We wrote these in support of the Information Technology
Industry Council (ITI) comments on Interconnection and Unbundling of the
local loop. We focus on the need to set rules which allow competitors to
use the copper wire "local loop" for ISDN, ADSL, HDSL and other higher
speed digital technologies. The incumbent local exchange carriers
(companies like Bell Atlantic, NYNEX, US West, etc.), who own the local
loop, want to limit the network unbundling to "Plain Old Telephone
Service" (POTS). The Interconnection and unbundling proceeding is one of
the most important of the more than 80 FCC rulemaking that are now
underway to implement the new telecommunications act. Here are the
comments. Jamie (love@tap.org, 202/387-8030)
Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, DC 20554
)
In the Matter of Implementation of )
the Local Competition Provisions in )
the Telecommunications Act of 1996 ) CC Docket No. 96-98
Act of 1996 )
May 30, 1996
REPLY COMMENTS OF
CONSUMER PROJECT ON TECHNOLOGY
ON INTERCONNECTION AND UNBUNDLING
A. Introduction
1. The Consumer Project on Technology offers reply
comments on the Commission's Notice of Proposed Rulemaking
(NPR) on the above captioned proceeding addressing the
interconnection and unbundling provisions of the
Telecommunications Act of 1996 ("1996 Act"). Our comments
are supportive of those filed earlier in this docket by the
Information Technology Industry Council (ITI). ITI urged
the Commission to take steps to facilitate deployment of
high bandwidth services by providing national uniform
parameters that encourage new competition for services such
as ISDN, ADSL or HDSL. We agree with ITI that there is
significant unmet demand for the provision of high bandwidth
services for the residential market, and that national
uniform parameters for interconnection, collocation and
pricing are important.
2. The Consumer Project on Technology is a non-profit
organization which was started by Ralph Nader to promote the
consumer interest in matters concerning the development of
new technologies, including information technologies. For
additional information about CPT see our Web page at
http://www.essential.org/cpt.
B. Unmet Demand for High Bandwidth Services for
Residential Market.
3. According to the ITI pleadings, more than one third of
all U.S. homes have one or more personal computers, and most
new computers sold today are equipped with analog modems.
Analog modems are a very inefficient device for network
connections. Not only are analog modems relatively slow
when compared to off-the-shelf digital technology (28.8 Kbps
for analog modems versus 128 Kbps for BRI ISDN), but the
analog connections are less reliable, and suffer from a much
more time consuming launch and connect (and disconnect)
times than ISDN or other digital technologies. High quality
audio, usable video conferencing, and even browsing on
graphic intensive Internet Web pages requires faster network
connections that can be delivered over Plain Old Telephone
Service (POTS). End-to-end digital lines can also support
JAVA and other new methods of pushing network intelligence
out to a decentralized base of users.
4. The most likely new technologies for delivering higher
bandwidth connections to the home market are cable modems or
a variety of digital services delivered over the copper wire
infrastructure. Early optimism about deployment of cable
modems has given way to more realistic mid-term pessimism.
Less than 10 percent of cable systems currently support any
type of interactive communications. Even under optimistic
scenarios for deployment, it is very unlikely that a
majority of homes would be passed by cable systems that can
offer cable modem technology within a period of 5 to 7
years.
5. The only ubiquitous high speed digital network
connection for the residential market today is BRI ISDN, but
the incumbent local exchange carriers (iLECs) are reluctant
to deploy the technology, or price it reasonably. Companies
like Bell South, Bell Atlantic, US West, NYNEX and SBC are
pricing residential ISDN service between five and twenty
times the cost of POTS (in packages likely to satisfy most
residential ISDN users), too high for all but a handful of
residential consumers. The premiums charged for ISDN
service are far in excess of the company's long run
incremental costs (LRIC) for upgrading POTS to ISDN.
6. For example, in a recent Commission proceeding, U.S.
West estimated that the monthly non-traffic sensitive cost
of its BRI ISDN lines was only $1.18 per month more than the
cost of its POTS lines. (U.S. West, "Comments: in the Matter
of End User Common Line Charges," FCC CC Docket No. 95-72,
June 29, 1995, Appendix A.). However, US West tariffs for
BRI lines are several multiples of its POTS charges. For
example, in Utah a residential ISDN users would pay from $39
to $149 per month for BRI ISDN (plus a $6 SLC), with $74 per
month the most likely tariff (based upon the US West pre-
paid usage options and the $6 SLC). As a result, very few
Utah consumers have BRI ISDN service. Indeed, US West
reported that as of March 1996, it had only installed 53 BRI
ISDN lines.
7. In some states, residential ISDN tariffs are even
higher. We have heard from a consumer in Delaware (Bell
Atantic) who was billed more than $1,000 for a month of
local calls for BRI service, and a consumer in Massachusetts
(NYNEX) received a bill for more than $700 for local calls.
These higher tariffs have hurt ISDN deployment. Earlier
this year Bell Atlantic said it had less than 300
residential consumers for BRI ISDN service in Maryland, a
state with a huge interest in modern telecommunications.
PacBell recently sought large increases in its residential
ISDN tariff, and eliminated commissions on residential ISDN
BRI connections to its sales force.
8. ISDN tariffs are highly varied from state to state, and
residential consumers are completely dependent upon pricing
strategies of local iLECs and state regulators. For
example, the Northern Arkansas Telephone Company (NATCO)
charges only $17.90 per month, flat rate, for residential
ISDN service. The Roseville Telephone Company, the 23rd
largest telephone company in the US, which serves
California's southern Placer County and northern Sacramento
County, sells residential ISDN at $29.50 for unlimited
usage. Four of the five Midwest states served by Ameritech
(Illinois, Ohio, Michigan, and Wisconsin) have flat rate
residential ISDN for $28 to $35 per month. But in Indiana,
Ameritech charges residential consumers $100 to $1,829 for
ISDN service. BellSouth charges less than $30, flat rate,
for ISDN in Tennessee (a state where a key regulator was an
ISDN user), and $57 to $75 per month elsewhere. Bell
Atlantic's unlimited usage option for residential users runs
from $249 to $1,200 per month, depending upon the state. In
the US West service area, the unlimited usage options are
all over the map: $40 in New Mexico, $63 in Washington
State, $149 in Utah (the proposed tariff), and $2,309.64 in
Oregon (a state without a flat rate option).
9. When the iLEC charges ISDN usage fees, prices are also
highly arbitrary, providing striking evidence of monopoly
power. For example, Bell Atlantic (BA) basic proposed usage
charge for residential ISDN is $1.20 to $2.40 per hour, for
a 2B ISDN connection. However, under its new "call pack"
options, which is only available in some states, BA charges
$.75 to $.30 per hour for ISDN (2B) usage. In recent rate
cases for ISDN Centrex, BA said that its usage costs for
ISDN voice service (the same technology as is used for data)
were less than $1 per month. In Delaware, the PSC staff
said that the residential ISDN tariff should include a $1.60
per month flat rate option, which is a little more than a
nickel per day for 2B service. Consumers (and implicitly,
the value added content providers) who pay hefty usage fees
are being ripped off.
10. US West usage rates are also highly varied. Last
fall, US West tried to get $12 per hour for a local ISDN
call in Utah. The current standard US West usage charge is
$3.60 per hour (for 2B). In the newly proposed (but not yet
implemented) Utah tariffs, some usage packages are priced
at $.90 to $.22 per hour for 2B service. Cost studies in
the Utah proceeding show that even the $.22 per hour charges
are far above cost. These high usage charges are efforts by
the iLECs to "tax" value added services provided by
unaffiliated companies. With iLEC entry into value added
services, this will lead to anticompetitive business
practices, since the iLECs can offer value added services at
lower rates, since the usage charges at only transfer
payments within the company.
11. In a competitive market consumers would not see
such huge differences in residential ISDN tariffs. It is
essential to adopt interconnect and unbundling rules which
allow new entrants to use the local loop to provide ISDN and
other newer digital services.
C. Explanations for iLEC's failure to deploy ISDN
12. There are a number of theories as to why iLECs
don't want to market ISDN as a mass market residential
service. Here are some of the most popular:
i) iLECs want to sell second POTS lines. (A BRI ISDN
service provides the functionality of two POTS
lines, including separate telephone numbers). For
example, in Utah the best usage option for BRI ISDN
service is priced approximately $10 above the cost
of two business POTS line.
ii) iLECs hope to offer high speed Internet
services, bundled with ISDN or ADSL services, and
they do not want to provide a low cost alternative
over a common carrier platform.
iii) iLECs are concerned about cross-elasticities
between BRI ISDN and other business services (such
as US West's expensive commitment to frame relay ),
or to expensive residential mulitmedia networks
(most of which are still on the drawing boards).
iv) iLECs are concerned about high quality Internet
telephony delivered over ISDN or other digital home
connections.
v) In Utah, Scott Rafferty raised the general issue of
centralization of network intelligence, and the fact
that high quality end to end digital network
connections allow this intelligence to be
decentralized, much of it into the highly
competitive market for customer premise equipment.
This issue is analogous to the PBX/Centrex issue.
Of course, incompetence is also possible.
D. New Digital Technologies.
13. BRI ISDN is a digital technology that can be
delivered today to the residential market. Newer
technologies that may be available in 5 to 7 years in some
communities include ADSL or HDSL. There is considerable
interest in ADSL as a platform for Internet connections.
While ADSL is more costly to deploy than ISDN, it may offer
higher bandwidth connections over the existing copper wire
infrastructure. However, ADSL and other xDSL (the family of
DSL services) services require special equipment and
connections to information service providers. It is
essential that iLEC competitors are able to receive services
on a non-discriminatory basis, or the iLECs will monopolize
services that are delivered over xDSL services. The rules
for interconnection and unbundling should focus on how
competition can develop for xDSL services.
14. ITI asked the Commission to adopt rules which
require carriers to:
i) unbundle local loops,
ii) condition (when necessary) local loops to carry
digital signals,
iii) lease "dry copper" pair at reasonable prices (no
greater than for POTS),
iv) remove load coils at reasonable costs,
v) cooperate in testing of xDSL services, and
vi) otherwise make it possible and feasible to promote
entry into advanced transport services delivered
to the home.
These suggestions are very important. The FCC should not
set rules with POTS only in mind.
E. Collocation is Required and Needed for More than Basic
Transmission Equipment.
15. The Commission should reject the iLEC's efforts to
limit the types of equipment that may be collocated on their
premises. Collation obligations of iLECs under the 1996 Act
are not simply limited to "basic transmission equipment."
Indeed, the Congress added language during its Conference
committee which has expanded collocation obligations beyond
those originally adopted in the Commission's Expanded
Interconnection proceeding. While the versions of the bill
which passed both the Senate and the House only required
collocation consistent with it's proceeding on
interconnection [See, for example, H.R. Report No. 104-204,
104th Congress, 1st Session, pt. 1, at 73 (1995), which
mentions the need to clarify the Commission's authority due
to court challenges to the Commission's rules], the
Conference Committee expanded the iLEC's duties, to require
them to provide for "physical collocation of equipment
necessary to interconnection or access to unbundled network
elements at the premises of the local exchange carrier." By
adding the additional phrase, "or access to unbundled
network elements," Congress expanded the scope of
collocation. The collocation equipment should not be
restricted to traditional telephony. It should include
equipment that may be needed for ISDN, ADSL, HDSL and other
new technologies. This is also required by Section 706(a),
which states that the Commission should "encourage the
deployment on a reasonable and timely basis of advanced
telecommunications capability to all Americans.by
utilizing.methods that remove barriers to infrastructure
investment." As noted earlier, it is not appropriate to
adopt rules for collocation which apply to POTS only
service.
G. The Commission Should Avoid Usage Based Fees for
Unbundled Services.
16. One of the principal sins of the iLECs has been
repeated efforts to impose usage based fees for fixed cost
services. These usage based fees are largely designed as
mechanisms for price discrimination, based upon expected
differences in willingness to pay. This is possible because
of the monopoly power of the iLECs. Any new unbundling
requirements that are based upon usage charges for fixed
cost services will further institutionalize a highly
inefficient and socially undesirable pricing systems for the
fixed cost aspects of the network.
H. Unbundling Can Provide Important Yardstick
Measurements.
17. Unbundling is important, even if it isn't widely
employed, because it will provide an important yardstick of
true economic costs for the deployment of new services.
Thus, for example, if new digital technologies are provided
at much lower costs in some markets where collocation and
unbundling occur, this will help regulators in other markets
determine reasonable prices for new advanced network
services, even when economic barriers to entry as so great
that monopoly power remains. Indeed, we expect that
competition for local residential services will be very
limited over the next decade, and this yardstick benefit
will be very important for those consumers who do not
benefit directly from competition
May 30, 1996
Sincerely,
/s/
James Love
Director
Consumer Project on Technology
P.O. Box 19367
Washington, DC 20036
http://www.essential.org/cpt
202/387-8030; fax 202/234-5176
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
INFORMATION POLICY NOTES is a free Internet newsletter sponsored
by the Taxpayer Assets Project (TAP) and the Consumer Project on
Technology (CPT). Both groups are projects of the Center for
Study of Responsive Law, which is run by Ralph Nader. The
LISTPROC services are provide by Essential Information. Archives
of TAP-INFO are available from
http://www.essential.org/listproc/tap-info/
TAP and CPT both have Internet Web pages.
http://www.tap.org
http://www.essential.org/cpt
Subscription requests to tap-info to listproc@tap.org with
the message: subscribe tap-info your name
TAP and CPT can both be reached off the net at P.O. Box 19367,
Washington, DC 20036, Voice: 202/387-8030; Fax: 202/234-5176
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++