BELLS SAYS COMPUTER III RULES SHOULD BE SCRAPPED

As in other regulatory proceedings, parties defined critical terms differently. Bell companies compared their DSL deployment with spread of cable modem service, while ISPs (which generally don’t have access to cable modem facilities) concentrated on Bells’ growing domination of DSL market. “Today, the ONA restrictions serve only to place the former Bell companies at a competitive disadvantage compared to cable operators and others who operate without restriction,” Verizon said. Qwest said: “The FCC’s rules continue to act as if cable modem services did not exist at all.” But Cal. ISP Assn. (CISPA) warned that Bell companies were “perilously close to establishing a new monopoly for the delivery of enhanced services over DSL lines.” CISPA said: “Absent immediate, forceful Commission action… the Internet access market will be controlled entirely by a small handful of BOC [Bell operating company] owned and controlled ISPs.”

“The conditions which caused the Commission to adopt strict nonstructural regulations in 1986 have evaporated,” Verizon said. Citing competition from “literally thousands of new entrants,” it said “it would not be possible, much less in their business interest, for the Bell companies to engage in anticompetitive practices.” Verizon said FCC, “by eliminating regulatory restrictions,” could “help provide the needed encouragement for the Bell companies to develop innovative competitive telecommunications and information services.” It said ONA requirements were irrelevant anyway, since it had received “no new complete requests for ONA services since 1995” and FCC “has not received a single formal complaint of any former Bell company’s failure to meet ONA obligations.” (ISPs didn’t entirely disagree, although they argued that it was cause for tougher rules, rather than removing existing ones. Said the N.H. ISP Assn.: “We have not been able to use any ONA elements at all, for any purpose.") Qwest touted its “efforts to serve enhanced service providers whose business Qwest desires to nurture and to keep… Enhanced service providers are satisfied with services which Qwest offers and provides to them, or at least are committed to working with Qwest to ensure that Qwest’s products are offered in a satisfactory manner.”

Meanwhile, ISPs and their groups continued to call for tougher rules, including return to structural separation of Bell companies’ ISP affiliates, and stricter enforcement of existing regulations. They said ISPs faced razor-thin margins for DSL service since Bell companies leased them DSL facilities at nearly retail price. Santa Monica-based ISP Brand X said: “No amount of regulation will solve SBC’s inherent conflict of interest. The only solution is for SBC to completely divest itself of its ISP business.” It was particularly critical of SBC’s quantity discounts for ISPs ordering more than certain number of DSL lines, for which only SBC’s affiliated ISP qualified. CISPA said SBC’s affiliate PacBell Internet (PBI) recently raised its DSL price $10 to $49.95, now that its “pricing strategy has recently come to fruition” and it had “eliminated much of the competition and captured a large majority of the DSL market… Apparently, SBC and PBI are confident that they no longer need to rely on under-market price schemes.”

Commercial Internet eXchange repeated its contention, made several times over last few years, that ISPs should be eligible to obtain unbundled network elements from Bell companies as did competitive phone companies. Many ISPs complained of blatantly discriminatory treatment in favor of the Bells’ affiliates, in services as well as pricing. “BOC customer service representatives and technicians even inform potential DSL customers that their DSL service will begin sooner if ordered through the BOC ISP,” CISPA said.