The U.S. House of Representatives is about to vote on a bill that would impact every California Internet user—and not for the better.
As a result, consumers would have less choice for Internet service and pay higher prices, while the regional economy would lose thousands of jobs.
We have already seen what happens when the dominant local phone company is turned loose without close supervision. Pacific Bell was recently fined $20 million by the California Public Utilities Commission for practices that The Utility Reform Network called "unfair and misleading" to consumers. The Federal Communications Commission proposed seeking a $100,000 fine against SBC, Pacific Bell’s parent company, for hindering an investigation into the way SBC provides access to its local phone network for Internet service providers. Not a good track record for a company seeking market dominance over the one of the most promising sectors of the economy.
Current law requires the Bell companies to show that competition exists in local phone markets before they are permitted to move into the long-distance market and high-speed Internet market. Tauzin-Dingell would remove this competitive safeguard. Ironically, the Bells have been "successful" in creating a new monopoly without the help of Congress. In its own filings with the Federal Communications Commission, Pacific Bell says it has more than 85 percent of the DSL market in California. Tauzin-Dingell would simply expand and preserve that monopoly by putting smaller carriers and ISPs out of business. Without these competitors, there is little choice, and without a choice, consumers and small businesses will suffer.
Which is why the Consumer Federation of America (CFA) is against the Tauzin-Dingell bill. ÒThis act would be a boon for "Baby Bells’ but a disaster for consumers," says Marc Cooper, director of research for the CFA. "The Bells are being rewarded with a bill that would help them to maintain their local phone monopolies and establish a new monopoly in the market for broad band services."
Tauzin-Dingell would rewrite, and in some instances repeal, key parts of the landmark 1996 Telecommunications Act. At the time, the Bell companies had a huge competitive advantage built up over a century of public subsidy and monopoly—essentially a 100% market share. The 1996 act thus restricted the Bells from certain markets—such as long-distance data transmission to allow newer, smaller companies a chance to compete on a level playing field with the Bells’ own subsidiaries. The Bells must currently allow competitive carriers and Internet service providers to use their network at wholesale cost for high-speed Internet services like DSL. These network facilities provide the "on and off ramps" to information highways for most telecommunications services. Tauzin-Dingell would end fair access to these networks, preventing other companies from competing in any meaningful way.
In recent years, the Bells’s new competitors have poured more than $50 billion into new research and infrastructure to support the tech boom of recent years. And they have become the data transmission providers of choice for small businesses and Internet service providers. The Association for Local Telecommunications Service estimates that more than 70,000 jobs would be lost if Tauzin-Dingell becomes law. And the billions spent on investment and innovations would end up being for naught, if Congress allows the Bells to lock out competitors.
Many academic experts agree on Tauzin-Dingell’s monopoly impact. Yale Braunstein, Ph.D., of the School of Information Management and Systems at the University of California at Berkeley, says that this legislation "would certainly stifle competition, reduce customer service, and increase Internet costs for consumers."
Throughout most of this century, the telephone network was a regulated, "end-to-end" monopoly where "Ma Bell" was the sole provider of all services and products, including the phone itself. While having one company do everything can sometimes make things simple, America decided a long time ago to favor the benefits of true competition: lower prices, innovation, more choice, better customer service and job growth. The 1996 Telecommunications Act offered a promise of choice and competition that has not yet been realized.
If Congress caves to the Bells, it will be consumers, small businesses and the economy that will pay the price.
Mr. Jackman is Executive Director of the California Internet Service Providers Association, Inc.
