DSL Ruling Will Be A Landmark

While Congress in a rewrite of the Federal Telecom Act of 1996 is likely to speak further on the regulation of broadband, the Supreme Court's action left the FCC with a perceived imbalance, because if cable broadband was information service, why wouldn't telecom DSL broadband be information service also? So they corrected this awkward policy position on Friday by giving telecom-based DSL the same treatment - its broadband service is an information service also, so not subject to telecom regulations, which will be phased out.

According to the telecom establishment, a broadband tsunami will be unleashed by this ruling, as the lack of control of their infrastructure (they were required to let competitors onto their networks) kept the Bells hamstrung, and prevented them from waging an aggessive rollout of broadband infrastructure. Now, finally, they can get going. But their reliance on wired infrastructure means that it will take time to deploy networks.

So what does cable/DSL broadband competition look like? We could look a lot of places, but my hometown paper offered a convenient article (Deals galore for Net access) today, so let's check that out.

Competition like we've become accustomed to with cellphones may be coming to broadband soon, according to this article. So far, I haven't seen it (I'm still paying $45/month for Time Warner broadband, reluctant to switch to DSL), but here in the most wired city in the US, maybe we'll be on the front row.

One way to cut prices is to hop from promotion to promotion, but providers have figured that out and tend to tie in a commitment, as with SBC, which has cut its price even more this year, down to $14.95 a month with a 12-month contract. And they're starting to break up service into levels, ranging from a little faster than dial-up to multiple-megs.

In recent months, SBC, Time Warner and other companies have been slashing prices, with cut-rate offers that make some grades of broadband as affordable as old-fashioned and far slower dial-up service.

Citing penetration of about 35 million U.S. households with some form of high-speed Internet access since it came about in the late 1990s, the Statesman says the target of the rate cuts is the estimated 36 million dial-up users (at the end of 2004) who might switch to broadband if the price were right — and who might then become customers for other services the companies sell.

Time Warner Cable, the dominant cable provider in the Austin area, responded to aggressive moves by SBC by promoting Road Runner Lite, a slower version of its high-speed service, for $19.95 a month, which I may consider, but I wonder how "lite" it is and if I'll notice the difference.

Broadband Internet service is moving from a novelty to a necessity, thus my hesitation to go down in speed in order to go down in price. I like my high-speed Internet. Would you seriously consider cutting your phone bill in half if it meant that the sound quality would go crackly now and then, and sometimes your phone wouldn't ring? I'm not buying that I have to go down in quality in order to get a discount. It's one thing when your standard of comparison is dial up, but another when you've been using high-speed for years. So, they are not focused on winning me over.

But a lot of consumers are more price-sensitive than I am. Clearly, this is the growth area for cable and DSL broadband providers, not only dial up users, but price sensitive broadband users. And there is more at stake than broadband, as the price skirmishes are part of a bigger war between cable and phone companies.

Each industry is trying to expand onto the other's turf. Both are offering broadband as part of a bundle of services that include phone, Internet and cable television. It's the so-called triple play that the industry believes will be the basis for business well into the future.

The goal is to lure new customers with bargain prices and hope they like broadband service enough to keep it after the introductory price expires.

What I hate is the irony of this marketing, where they seem to be begging me to switch. I don't feel loved by my broadband provider. Get this, they are actually nicer to the customers they don't have, than the ones that they do have - that's not real competitive behavior, in my book. Most of the promotional offers are not open to that provider's current broadband customers. And indeed, that was the case when I talked to Time Warner last week. So, I'm hesitantly banking on FCC Chairman Martin's wisdom, and will be watching from a ring-side seat as two of the biggest broadband providers duke it out in one of the most penetrated markets in the US. But I'm also promoting wireless at the same time, more or less written off in all the discussion this weekend - I really believe that a wireless network inserted into a duopoly wired network will keep all the players more honest, and result in even more competition.

Let's watch the Bells closely and the cables even closer. "The phone companies' voice business is already drying up," Brumfield said. "That's why they are making sure they get as much market share as possible as quickly as possible before the cable companies come in and eat their lunch with low-cost phone service. They are really trying to solidify as many customer relationships as they can before the real competition arrives."

Time Warner, Brumfield said, is not promoting Road Runner Lite on a national basis. "This is very much specific to markets where they are feeling some competitive heat."

See these three articles for further perspective on this complicated issue.

FCC removes DSL network-sharing rules | InfoWorld | By Grant Gross, IDG News Service This article by Grant Gross provides a good overview - picked up by many Internet news providers, so you will start to read the same article over and over again as you surf.

The Progress & Freedom Foundation Blog: Bravo on Broadband FCC protects property rights of telecom companies, finally coming to their senses. Pheww!!

PCWorld.com - DSL Deregulation Effort Sparks Opposition Consumers Union and other consumer groups' prayers go unanswered as FCC deregulates telecom DSL to create a duopoly. Consumer groups predict dire consequences, and hey they called it right with FTA 96...