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Court Ruling Could Spur or Squelch Broadband Competition

Posted on: Monday, 11 July 2005, 09:00 CDT

Colorado homes and small businesses with high-speed Internet lines surged 46 percent in 2004, faster than the national average.

Price wars are favoring consumers, with both Comcast Corp. and Qwest Communications recently offering high-speed Internet deals for as low as $19.99 a month for the first few months of service.

Will a recent U.S. Supreme Court ruling lead to even greater growth of high-speed Internet use, also called broadband? Will it help advance President Bush's goal of access to affordable broadband service for all Americans by 2007?

Or will public policy work to cut competition, destroy the little players, and set the stage for a duopoly in Colorado controlled by Comcast and Qwest?

Those are questions industry officials and consumer activists increasingly are debating in the wake of the Supreme Court's decision last month to exempt cable companies from being required to share their lines with rival Internet service providers.

That decision, National Cable & Telecommunications Association vs. Brand X Internet Services, is expected to make it more likely that the Federal Communications Commission also will loosen broadband network-sharing rules for the Bells such as Qwest.

The FCC already agreed in early 2003 to phase out rules requiring the Bells to share DSL lines, and FCC Chairman Kevin Martin told The Wall Street Journal last week that he wants to move forward quickly to establish broadband regulatory parity for cable companies and telcos.

That has many worried that broadband competition in the future may be limited mostly to the big cable companies and Baby Bells, which control most of the communications lines that go into the homes and businesses. In Colorado, that would be Comcast and Qwest.

"The FCC is setting in motion a policy of creating a duopoly," said Chris Magnuson, president of Peak to Peak Internet Services, a Boulder Internet service provider. "Should this come to pass, it will greatly harm the interests of consumers/businesses, severely limiting their choices."

ISPs typically must rely on buying certain services from telcos unless they have their own facilities and lines in place.

"We resell a variety of carriers," Magnuson said, "and we were hoping the Brand X case would open up cable (for resale as well)."

Mark Cooper, research director of the Consumer Federation of America, is one of the most outspoken on the issue, calling the recent Supreme Court decision a "grave error."

Consumer activists such as Cooper think that rival Internet providers either will have a hard time getting access to certain services from the Bells or will have to pay exorbitant prices to do so.

Cooper also contends the U.S. has slipped out of the top 10 in the world in high-speed Internet adoption in part because federal regulators have refused to require cable operators to provide access to their networks by rivals.

Magnuson said it's tough to speculate about possible impacts, "but without the presence of adequate regulation, phone companies in general don't do the right thing for competition and consumers."

Both Qwest and Comcast contend that loosening the requirements will maintain the momentum to advance high-speed Internet use in the United States.

Steve Davis, Qwest senior vice president of public policy, believes that cable modem service has grown faster than the DSL Internet service offered by the Bells because it's been "completely unregulated . . . while we've been very, very tightly regulated."

Nationwide, cable modem service controls more than 55 percent of the market. In Colorado, 332,927 cable modem lines were in service as of Dec. 31, 2004, compared with 248,285 DSL lines.

Davis further noted that under FCC rules, Qwest must give at least a 60-day notice on its Web site of where it plans to offer new DSL service - for all competitors to see.

Qwest has increased its DSL coverage area in its 14-state area 60 percent in the past three years - the service is now available to more than 80 percent of Denver households and businesses. But the argument is that the Bells would be even more willing to invest if regulations are eased.

"The FCC needs to move quickly to equalize regulation (between cable companies and telcos) and that will spur deployment," Davis said.

Tom Friedberg, an independent telecommunications analyst in Denver, for the most part buys that argument.

"I actually think it helps the development of the broadband market," Friedberg said of less regulation. "From a pure business standpoint, I think carriers will be more willing to deploy (services and various features)."

Davis maintains loosening regulations won't have a material impact on ISPs in Qwest's territory.

He noted that Qwest signed a three-year, DSL line-sharing agreement with Covad Communications last year - the first Bell to do so. And "our customers can choose any ISP they wish" when signing up for Qwest DSL service, Davis said. Qwest lists 88 ISPs in Colorado on its Web site.

Friedberg said he doesn't know whether less regulation necessarily will make it more difficult for other Internet providers to compete.

"Theoretically, they could still resell," Friedberg said. "The Bells (such as Qwest) will still wholesale, but it might be more expensive. And independent ISPs might not be able to get content on such favorable terms."

Consumer watchdogs also are concerned about whether the Bells and cable companies will work to maintain high levels of quality and service.

At least for the moment, high- speed Internet subscribers are benefiting from stiff price competition, although not quite to the degree enjoyed by some consumers elsewhere in the country.

San Antonio-based SBC Communications, for example, in June launched one of the most aggressive offers with a $15 a month deal for subscribers who sign up online.

Comcast is offering high-speed Internet service for as low as $19.99 a month for six months, then $42.95 a month thereafter, at download speeds of 4 megabits per second and upload speeds of 384 kilobits per second. The customer also must subscribe to Comcast cable TV services. Installation and equipment offers vary by market.

Qwest is offering DSL high-speed Internet service with MSN for as low as $19.99 a month for 12 months with free activation and free modem rental for 12 months for those who subscribe online and also have a Qwest local phone package. The price is $39.99 a month thereafter. Download speeds are 1.5 megabits per second.

Prices and content are subject to change, and consumers also should check such details as the length of the contract required. The Qwest DSL price does not include ISP charges.

Source: Rocky Mountain News

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