- The Washington Times - Sunday, February 2, 2003

Telecom has burst on to the Washington scene again, after suffering through its own metaphorical nuclear winter the past two years. If you weren't prepared for the weather, it got awful cold out there most local service competitors have died off either from too much debt or just plain bad business judgment.
But for those of us still standing, 2003 could be the long-awaited thaw.
The question of whether there will be a warming trend in telecom (continued competition, investment and lower costs to consumers) or a continuation of nuclear winter (no investment, no innovation and higher prices for consumers) will be decided by the Federal Communications Commission in the coming weeks.
This is a unique window of opportunity for the FCC to promote facilities-based competition in broadband, but if the trial balloons that were floated recently in the press are any indication, the outcome may very well be chilling.
At 50,000 feet, the debate continues to be portrayed as a battle between AT&T; and the Bell monopolies. But this debate should not be about whether a customer's choice is between an AT&T; or a Verizon. It should be about promoting facilities-based competition in broadband and seeing if the entrenched behemoths are nimble and innovative enough to keep pace with the entrepreneurs offering better service and lower prices.
For example, Allegiance Telecom competes against the Bell companies in the small and medium-sized business market. Most of these customers do not generate enough revenue to justify overbuilding the last mile loop that connects their offices to the ratepayer-built public switched network. We serve these companies by deploying our own switches, buying transport from third parties where available and leasing the "last mile" loop from the Bell monopoly. There is no alternative competitive platform provider in this space; cable offers mainly a residential service and wireless does not offer the competitive suite of products demanded by today's business customer.
Competitors like Allegiance have flourished by offering innovative broadband solutions such as our integrated access product that offers voice and data over the same loop at up to 40 percent below the Bell company price. We have been so successful in delivering these big business products at small business prices, that the Bell companies recently launched competitive broadband offerings in most of our 36 markets across the country.
It is this continued innovation in broadband that is at risk in the FCC debate. Two years ago, 10 percent of Allegiance customers had a need for broadband offered over our integrated voice and data product. Today, 75 percent of our customers demand this broadband functionality. The Bell companies are now playing catch up ball in the marketplace by offering copycat broadband products. That is facilities-based competition at its best. But the proposals being considered at the FCC would freeze this innovation and kill off any hope of broadband competition to the Bell companies. These proposals, advanced under the guise of "promoting broadband investment," would have the perverse effect of freezing the level of capacity available for a small business unless they are a Bell customer.
The Bell companies and their "Pied Piper" front groups are working to convince the regulators that, without deregulation, the monopolists will have no incentive to deploy advanced services. SBC actually holds the promise of broadband like a gun to regulators' heads, declaring: "Deregulate, or else." But this is an empty threat. The Bells' have an inherent cost reduction incentive to deploy broadband products; it is far less costly to roll out new networks than to maintain costly existing copper networks. This economic reality, combined with the market evidence of the Bells' response to competitive broadband offerings, demonstrates that without continued enforcement of the FCC's unbundling rules, the Bells will have less incentive to invest in broadband. Not more.
Yet, this is the point at which we find ourselves. There is no alternative platform provider of significance in the small and medium business sector that offers the same level of product and price competition to the Bell companies. If the FCC prematurely deregulates the Bell monopolies, continued development of broadband will surely be at risk for America's most vital business arena.
The question is, will the FCC continue its commitment to the proven fact that competition breeds broadband innovation? Or will the regulators support policies that freeze innovation at arbitrary levels in exchange for historically hollow promises from the Bell monopolies? We are about to hear their answers.

Royce Holland is chairman and chief executive of Allegiance Telecom Inc., a national facilities-based Bell competitor serving medium and small businesses.



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