Re: FC: More on how FCC and Congress will regulate new vs. old media

8 Feb 2001

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Declan McCullagh wrote:
...
From: "Dave McClure" <dmcclure@usiia.org>
I fear that in the current environment, the answer will be to allow all
networks to be closed to competition.  That scrunching sound you hear
is the door slamming shut on 7,000 independent ISPs. . .
Regards,
Dave McClure
[Dave and I generally agree, but we may part paths here. We justify keeping
telco lines open because of the ex-monopoly status of the RBOCs, but in the
long run hope that those regulations can fade away. --Declan]
I'm afraid I have the numbers to back up Dave....  That's fine in 
theory, but in your "long run", we are all dead.

I'm a partner in an ISP in rural northern Mississippi.  We were the 
first in the region, 7+ years ago, and have been offering DSL about 
a year.

Bellsouth charges ISPs $40 per month, plus $375 installation, for a 
"dry pair" (alarm equivalent), or $91 per month, plus $2,000 
installation, for the "unloaded" version (needed for DSL over more 
than a few hundred feet of distance).  That's a pair with no switch, 
no user billing, nothing.

We have to provide both ends of the equipment, switching, and 
Internet service from a backbone.

Bellsouth went to court to overturn the original FCC determination 
that a fair price for an unbundled pair would be $15 per month 
in rural Mississippi (less in more urban states).

Bellsouth.net, the unregulated subsidiary, just showed up in several of 
our towns offering ADSL for $40 per month at 1.5M/256K bps, with 
higher fees for "business" rates.

Calculating costs for upstream, amortizing costs of equipment, and 
assuming that a T3 will support about 900 DSL users, unregulated 
Bellsouth.net would have to pay regulated Bellsouth less than $8 per 
line per month to break even.

Since we "know" that Bellsouth.net has very few customers as yet, we 
can understand that they might operate at a loss for awhile.  Still, 
it would take pretty deep pockets....  But, assuming that they are 
being charged the tariffed rate for wiring that Bellsouth swore in 
court papers was needed as a base price, they can NEVER MAKE MONEY.  

Remember, the Bells were highly subsidized when they started up.  
They've leveraged that subsidized monopoly into owning all the rights 
of way, and by statute are exempt from paying to install their lines.  
We have to pay a monthly fee to the cities per pole and linear foot 
where we run our lines in parallel, although there is a court case over 
that in some states.  Our barriers to entry are huge.

Sorry, but the unregulated regime is killing ISPs, and the tenor has 
drastically changed now that the baby bells know that the new 
administration is unlikely to rein in anti-competitive behaviour.

William Allen Simpson

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