ITHACA, N.Y., Feb. 19 -- Kevin Martin, a member of the Federal Communications Commission (FCC), is "an unlikely hero" for opposing changes in the regulation of local phone companies, according to Cornell University economist Alan McAdams.
Changes proposed by FCC chairman Michael Powell could create regional monopolies that would stifle innovation and growth of open broadband telecommunications, making such networks more costly, less flexible and less versatile, McAdams says. "Kevin Martin has emerged as a hero protecting the nation from a return to ironclad monopolization by incumbent local exchange carriers," he says.
While the debate at the FCC is supposedly about who will provide local phone service and digital subscriber line (DSL) Internet service, the real battle, McAdams says, is about the future of Ethernet networks over optical fiber infrastructures that are capable of supporting gigabit (billions of bits) speeds, which he calls "AFN" (for advanced fiber networks).
McAdams says the actions proposed by Powell to deregulate incumbent local exchange carriers (ILECs) and grant them exclusive use of any new infrastructure they build could have dire consequences when they apply to AFN technology. He points out that through the combination of deregulation and guaranteed freedom from competition, each ILEC would be virtually assured a monopoly in its region and could control the content, applications and services (CAS) made available to end users.
McAdams chaired the Committee on Communication and Information Policy of the Institute of Electrical and Electronic Engineers (IEEE)-USA for two years through the end of 2002 and has been a member of the committee for two decades. In June 2002 he led a team that convened a workshop, jointly sponsored by the IEEE-USA and Cornell, to lay out a roadmap for more rapid deployment of broadband development in the US. The IEEE-USA is expected soon to issue a position statement based on the report of that workshop, which essentially recommended that AFN be "included in the debate" on accelerating broadband deployment in the US.
Currently, under the Telecom Act of 1996, local telephone companies are required to make their physical networks available to competing service providers; this is why phone subscribers have a choice of long-distance companies, and even local service companies. The incumbent phone companies have asked the FCC to grant them exclusive use of any new infrastructure they build.
Martin opposes the change, saying such regulation should be reserved to the states. In several states, the regulatory commissions have taken an active interest, reducing the wholesale tariffs that the ILECs are able to charge to CLECs (competitive local exchange carriers) that share their infrastructures. The result has been that between them, CLECs, AT&T and MCI have gained a market share of approximately 10 percent of the lines in the local market. The competition hoped for with the Telecom Act of 1996 is beginning to emerge, McAdams says.
Martin, a Republican, has been joined by the two Democrats on the commission, creating a 3 to 2 majority. The final decision has been postponed several times, most recently to Feb. 20. At that postponement, Powell said he did not have the votes to prevail.
Phone companies usually run fiber as far as a local neighborhood but currently make the final connection to a home or business over copper wires, limiting DSL to mere megabits (millions of bits). Cable companies offering Internet connectivity may also use fiber part way along their systems, but send their signals to end users over coaxial cable, currently promising maximum speeds of tens of megabits per second, with current market offerings at far lower speeds. So far both technologies are offered "asymmetrically," meaning that upload speeds are much slower than download.
AFN technology transmits data as pulses of light sent through optical fiber, where a single wavelength of light can carry tens of billion of bits per second, enough to handle not only computer data but also video and voice telephone services. Using multiple wavelengths can offer multiple tens of gigabits; experiments have shown that it is possible to use more than 1000 different wavelengths over a single fiber.
With AFN systems optical fiber runs all the way to the end user, providing not only faster Internet service but also the ability to carry video and voice telephone competitively from multiple CAS providers. "The technology was built to permit competition," McAdams says.
Ideally, he says, these networks should be owned and controlled by their end users, rather than by the ILECs. In contrast to the current "vertically integrated" cable and telephone systems, user-owned systems would be open to many competitive content providers. End users could choose from a variety of Internet service providers, telephone and video services, and competition among service providers will bring prices down.
"On the other hand, if the telcos can monopolize the fiber to the home, they would determine what content, applications and services can and can't reach you," McAdams warns.
AFN networks are capable of so much bandwidth that McAdams has used the slogan "Only too much is enough." Once the infrastructure is in place, he explains, the "marginal cost" to use the network -- that is, the cost to send another e-mail message -- is zero.
That's both the good news and the bad news, he says. It makes it attractive for end users to build their own networks and finance them at least in part with the money they no longer pay for services from the incumbents. But it also means that "whoever gets to the end user with fiber first can have a monopoly." If the phone company builds fiber all the way to the home or business, McAdams explains, under the new rules it would acquire an instant monopoly: Since the cost of serving that user is zero, no potential competitor could hope to undercut the incumbent's price and unlock that user.
But with free competition, he sees a future in which major corporations, school systems and municipalities lead the way to the new technology by installing their own systems. Once the infrastructure is in place for those users, with fiber lines crisscrossing the community, it will be easy and relatively inexpensive for small businesses and eventually private homes to connect. Rural areas not now served by cable and DSL are also likely places to install AFN networks.
AFN technology is rapidly maturing and can be bought off the shelf today, McAdams says. As an example, he cites Quebec province in Canada, where over 1,000 public schools built AFN networks in the year 2001 alone, reporting that the cost of the infrastructure was recovered in fees not paid to commercial providers. American school systems, municipalities, and small and medium businesses also are building AFN systems, and using them for many innovative activities. Several Fortune 100 corporations have built their own internal AFN networks and connected various branches of their companies to one another with fiber. The result, McAdams says, is decreased cost and increased profits for those organizations.
User-owned AFNs do have a negative impact on the business models of ILECs, McAdams says, so the incumbents are likely to try to block AFN efforts through anticompetitive or political action. However, he adds, the expertise these companies can offer will be essential to the success of the new systems.
Because AFN deployment is proceeding rapidly elsewhere in the world, "Blocking it or undermining it by permitting it to be monopolized in the US would only come at great cost to US international competitiveness and domestic economic growth," he says.
For more information, visit: www.johnson.cornell.edu