Outside view: Broadband for dummies

WASHINGTON, March 19 (UPI) -- With the plight of Enron Corp. and Arthur Andersen dominating the headlines, it is quite easy to overlook the most important economic issue facing legislators and regulators this year -- how best to provide high-speed Internet access to the American consumer.

A truly successful resolution of this problem will almost certainly require major changes in the Telecommunications Act to 1996.

The House of Representatives has already responded to this issue with the recent passage of the Tauzin-Dingell bill making it easier for regional Bell telephone companies to enter the high-speed "broadband" market. The issue now moves on to the Senate and the Federal Communications Commission. The battle lines have been drawn. It is essentially a public relations-lobbying battle between AT&T and the Baby Bells.

To cut through the spin-induced fog, this is essentially a fight over how best to resolve the so-called "digital divide." This division is not as Rev. Jessie Jackson would have us believe -- between rich and poor, black and white. No, it is a divide between urban and suburban, and until the last mile connecting both suburban and even rural consumers to high-speed Internet access has been completed the divide will continue.

The simple reality is that only 10 to 15 percent of the American people have high-speed Internet access. The rest are forced to rely upon slow moving dial-up connections. The true potential of the Internet can never be realized until broadband becomes the norm for access.

As Club for Growth President Stephen Moore recently wrote, "Broadband could transform the Web from a device exchanging e-mail and checking stock quotes into a tool that will link all business in an E-commerce web, let users quickly download video or music on demand and give rise to products and applications we can only dream of today."

To realize this vision, the nation must complete what is often referred to as the "last mile" of high-speed Internet access.

The broadband roadblock has its origins in the 1996 Telecommunications Act. Congress passed this legislation before most Americans had any access to the Web. The law sought to promote the laudable goal of competition among providers -- something free market types would agree to in principle. However, to promote competition lawmakers turned to anti-market remedies.

Congress mandated that a regional Bell must lease the use of its network to rival broadband service providers, Competitive Local Exchange Companies -- at a price determined by the FCC and state utility commissions.

In other words, the regional Bells would endure the expense and risk of upgrading the wires in its network only to be forced to provide these new lines to their competitors at below market prices. Not quite the proverbial free lunch for the CLECs but certainly the main course and dessert are being provided free of charge.

It probably should come as a shock to no one that the regional Bells decided to pass on the opportunity to subsidize their reveals. This caused the build out of high-speed Internet accesses known as DSL -- or digital subscriber lines -- to come to a grinding halt. Both telecom carriers -- like AOL, AT&T and Worldcom -- and suppliers -- such as Lucent, Ciena and Corning -- have been devastated by the dramatic slowdown in communications traffic. This in turn led to a collapse in telecom investments.

The industry will not recover until this logjam is broken. To that end, the House passed legislation that removes the below market price sharing requirements forced upon the bells. This will allow the bells to capture the full value of any investment in upgraded DSL capabilities.

This legislation now moves onto the Senate where Commerce Committee Chairman Fritz Holling, D-S.C., a supporter of AT&T, will probably keep it buried. However, the FCC, under the leadership of free market enthusiast Michael Powell, will be reviewing the Telecommunication's Act with an eye towards rolling back some of the regulations.

The vote in the House 273 to 157 sends a clear message to the FCC that legislators want to create new incentives for companies to invest in telecommunications. At this time, with so many of the CLECs in bankruptcy, the regional Bells are best positioned and rich enough to make those investments.

No one needs to worry about creating a new monopoly. Of those Americans with broadband, some 68 percent get it through cable television modems, many of which are owned by AT&T, which perhaps helps explain their opposition to Tauzin-Dingell.

Satellites are also capable of providing high-speed Internet access and if the FCC approves the merger of EchoStar and Direct TV a potentially powerful satellite provider will be in place. There is within the world of high-tech some emerging disruptive technologies such as ultra band that could in the not to distant future offer high speed Internet access on local laptops with which you could walk around the office or your home.

Time and events have changed dramatically since 1996. With the viability of the CLECs increasingly in question, its time to free up the Baby Bells and let them compete with cable, satellite and whatever new technologies are on the horizon. Let the battle begin.

(Timothy J. Heitmann is a regular commentator on the Radio America Network.)