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Thread Index FW: Common Sense
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Chad Kissinger chad@...
President 512-322-9200
Onramp Access, Inc. www.onr.com
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Get On, Get Seen, Get Business
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Common Sense
"The accomplice to the crime of corruption is frequently our own
indifference."
Bess Myerson
"The man who is admired for the ingenuity of his larceny is almost always
rediscovering some earlier form of fraud. The basic forms are all known,
have all been practiced. The manners of capitalism improve. The morals may
not."
John Kenneth Galbraith
"Like many businessmen of genius he learned that free competition was
wasteful, monopoly efficient. And so he simply set about achieving that
efficient monopoly."
Mario Puzo, The Godfather
Referring to Don Vito Corleone.
I'm writing to you about an outrage that is your fault. If you ever use a
telephone, or ever connect to the Internet, this outrage is costing you
money right now, will soon cost you even more money, and, worse, threatens
to steal the wealth of our country's bright future. Why is it your fault?
Because common sense says it is wrong and because you aren't doing anything
about it.
If you are like me, you aren't soon going to leap up from behind your
computer and begin working on the 4,000 hours of service the President has
asked all of us to perform. Well, if you'll simply spend fifteen minutes
reading the rest of this long e-mail, at the end, I'll show you a way that
you can have an enormous positive impact on our country's future by spending
thirty minutes talking to your elected officials and giving them a piece of
your mind. You can serve your country without ever leaving your seat.
I've even included some of their phone numbers at the bottom to make it easy
for you. I chose to write this long explanation rather than a short one
because there are plenty of sound bite explanations from the big companies
and from the elected officials whose cooperation they have bought with huge
campaign contributions. If you get tired, but are moved to agree with me,
please skip to the bottom and start calling. Here's my argument.
What happened to common sense? Lately, we seem to have totally ignored
some basic rules of economic prosperity. Here's a few examples.
Common sense: Don't invest heavily in companies that aren't earning a
profit and have no great prospect for doing so in the future.
Common sense: Make sure that independent auditors are independent.
Common sense: Companies that give tens of millions of dollars in campaign
contributions to elected officials expect something for their money.
Typically, it isn't something that is a good idea for the rest of us.
We all know that ignoring the above rules can have spectacular consequences.
So let me remind you of some common sense that our country is ignoring right
now.
Common sense: It's generally a bad idea to let private concerns develop
monopolies of critical resources. It's always a bad idea to let them
extend those monopolies to new areas and to let them charge whatever they
want for their monopolized products and services.
The railroad barons, oil monopolists, savings and loans, Enrons, Global
Crossings and Arthur Andersons of the world have taught us that greed lies
in the heart of man. Today's monopolists are no different. Monopolists
charge too much for their services. Monopolists offer lower quality of
service than is available in competitive markets. Monopolists tend to not
introduce new technologies that make the technologies they have already paid
for obsolete. Monopolists tend to use their monopolies to form new
monopolies in other markets.
Common sense: It's a good idea to either break up monopolies or to highly
regulate them to protect the public from their excesses.
We are very close to having an unregulated monopoly for telephone delivered
Internet access and that has serious implications for our future.
The very man who chairs the committee that has lambasted the Enron
executives, Rep. Billy Tauzin R-La, has reportedly accepted $10 million in
campaign contributions from the Baby Bells to support the monopolization of
the telephone delivery of Internet access.
The result is the Tauzin-Dingell bill, also known as the Broadband
Deployment Act. This Act is now due to be voted on in the House of
Representatives on Thursday, February 28th, 2002. In essence, Congressman
Tauzin and the Baby Bells say this in support of their bill
"It costs too much money to let competitors on our network. The cable
companies have a monopoly on their networks, so they don't have the same
expenses. That's unfair, so you should give us a monopoly on DSL and any
new advanced delivery technology too. If you do, we promise we'll deploy to
areas that aren't currently served by broadband. There's no need to
regulate our prices, because competition from cable modems and wireless
providers will keep us honest."
Simultaneously, Chairman Michael Powell of the FCC has proposed new rules
that allow the Baby Bells to bar independent ISPs from their DSL networks or
any new telephone broadband networks they might develop. Chairman Powell's
reasons are, frankly, pretty much polysyllabic gobbledygook. So it's hard
for me to translate them into simple English... but I'll try.
"The current regulatory environment provides uncertainty for telephone
companies. They are just going through too much trouble trying to let their
competitors on their networks. It's also unfair that cable companies have
no such regulation. This uncertainty is hampering the deployment of
broadband. So, we should let them have a monopoly on DSL and advanced
telephone networks. We don't need to worry about price regulating this new
monopoly because there are cable modems and wireless providers out there
that will do that for us."
Common Sense: That's stupid. Unregulated monopolies for critical
resources, like telephone service or the Internet, are plainly stupid.
Greed lies in the heart of man. The best way to protect against the
excesses of greed in any market is to gather up a bunch of greedy people and
let them duke it out. That's called competition.
I'll pass on the urge to explain why breaking up the cable monopolies makes
more sense (see the above diatribe on greed) and save your precious
attention for why this is such a bad idea. Hopefully, by the end of this,
you'll understand the depth of the fraud that Rep. Tauzin, Chairman Powell
and the Baby Bells are trying to sell.
1. The Baby Bells already control over 90% of the DSL market. On numerous
occasions, they have been found guilty by administrative judges of using
monopolistic like tactics to treat their competitors unfairly. How is
giving them the 10% of the market they don't already have going to move them
into providing service in areas where they aren't currently interested in
deploying? On numerous occasions, they've promised to deploy into these
very same areas and have broken that promise. Here's one example:
"SBC Communications Inc. promised Monday to spend $6 billion over the next
three years to deliver high-speed Internet service to at least 80 percent of
its customers in 13 states." 10/19/99 Austin American Statesman
"SBC Communications Inc. said Monday that it will cut several thousand jobs
across its 13-state territory during the next several weeks while
dramatically slowing spending for construction of digital phone line service
for high-speed Internet access." 10/23/01 AAS
They also promised to do the same thing again and promised to expand into 30
new major cities outside of their monopoly service area as a part of their
merger with Ameritech. They've done neither.
Why is Congressman Tauzin giving them a monopoly to incite them to deploy
instead of holding them to promises they've already made? There are 10
million reasons why.
2. The heavily unregulated DSL market has been virtually monopolized and the
cost of DSL has gone up in the U.S. from $39 to $49. It costs $29 (US) in
Canada for the same service. Right now, Canadians are twice as likely and
South Koreans are four times as likely to have broadband access than
Americans. That's pitiful.
It's interesting to note that, at the same time, the Baby Bells haven't had
the same success in the heavily regulated dialup market (dialup access uses
heavily regulated lines). They control less than 10% of this market and the
price has steadily dropped over time. Giving them exclusive control of DSL
and new technologies will only make this trend worse.
3. How is competition from cable modems and wireless providers going to
regulate the Baby Bells prices? The basic premise of the legislation is
that there are areas where there are no telephone, cable or wireless
providers of broadband access. In these areas, won't the telephone company
have a total monopoly on access? If the cable providers are on their way
out there, why are we giving away a monopoly to the Bells to get the job
done? What will keep them from charging outrageous rates in these areas?
Monopolies charge too much for their services.
4. Cable modems and wireless connections don't exist everywhere. There are
some places that only can get access via telephone lines. That is
especially true in the rural areas that the Tauzin-Dingell bill purports to
help. In those areas, won't the telephone company have a total monopoly on
access?
5. Cable modems and wireless connections aren't suitable replacements for
telephone delivered access for many users. If you doubt this, go find a
computer network guru at any company. Ask them how they would feel about
replacing their current Internet connection with a cable modem or wireless
connection. Cable modems, and current wireless technology, have different
qualities than telephone delivered access. For a huge segment of our
business economy, the only real access solution is to use some type of a
telephone line. This law would give the Bells a monopoly on those types of
lines.
6. Technology doesn't stand still. I bet many of you have an old 14,400
modem in your closet somewhere that proves this point. That was current
technology just five years ago. What happens when a new telephone delivered
technology comes out that is superior to DSL, T1s, T3s and other current
technologies? This law would guarantee the Baby Bells a monopoly in that
service, if they decide to deliver it all.
7. The Baby Bells have consistently avoided the adoption of new technology
in order to protect their investment in their old technology. In the early
days of the Internet, they loudly complained that dialup modems were putting
a dangerous load on their network. More recently, they complained that ISPs
who were trying to deliver DSL where literally damaging their network and
affecting other services for other customers. Only after they saw that we
were making money doing so did they began to mass market dialup and DSL
services themselves. Telephone oblivion has, apparently, been narrowly
avoided. Monopolies tend to do everything possible to extend the life of
their current investment. If a new technology comes along, they try to
delay its deployment to stretch out their income stream generated by their
currently deployed technology for as long as possible.
8. If the Baby Bells are allowed to form a monopoly here, what will keep
them from leveraging that monopoly into other related markets, like web
hosting, video conferencing, voice over IP and video on demand? If they
control the cost to their competitors for Internet access, they can
monopolize these any many other markets too.
9. Letting one company control large parts of the Internet is dangerous.
This is another example of ignored common sense: Don't put all of your eggs
in one basket. For instance, Qwest, now one of the Incumbents, last year
failed to provide e-mail for nearly a week to all of their DSL users. What
is the effect on the economy when 90% of the businesses in a community
cannot get to their e-mail for a week? Another example: Just this week,
SBC-Ameritech announced that tens of thousands of their customer's had their
personal information accidentally published on the World Wide Web. This
included names, addresses, usernames and passwords. Anyone who viewed the
site could download and read the mail of any of those businesses by logging
in with those usernames and passwords. How much damage can be caused by a
criminal with access to the e-mail of the entire business community?
Mistakes happen. Hackers exist. Networks are compromised. We should limit
the magnitude of each mistake by insuring that there is diversity in the
network. In other words, let's spread our eggs around into many baskets.
10. Passing either of these measures would undermine the power of the rule
of law in the United States. The rule of law is important for business
because it provides certainty. It sets rules that create a stable,
predictable environment in which business can prosper. The counter-example,
of course, is Russia. In Russia, you never know if your contract with
someone else will be enforced by the state. There is no rule of law, so it
is dangerous to invest there, so people don't.
In 1996, Congress changed the rule of law with the Telecommunications
Deregulation Act. Basically, they said that they would regulate the Baby
Bells and create an environment suitable to create and maintain effective
competition in local telephone service. The new rule of law said "If you
invest your money in this industry, we'll make sure that the existing
monopoly doesn't treat you unfairly." Then, of course, the government took
the campaign contributions of the Baby Bells and broke their promise.
Although the Bells have repeatedly been found guilty of breaking the rules,
they have only been fined the equivalent of a few days of profits for doing
so. Now they want to eliminate the rules all together.
The result is that the competitive telephone industry is in shambles. Most
telecom providers have already gone bankrupt, many will follow. The Wall
Street Journal reported that it is estimated that 40% of the wealth lost
last year in the markets was due to the failure of telecom companies and the
concomitant affect on their vendors. If we finalize this failure of the rule
of law, instead of fixing it, what will be the result the next time Congress
wants to induce investment in a particular area?
The Baby Bells already have a de facto monopoly on residential telephone
service and DSL in the U.S. Now, they want to formalize that monopoly in
law and extend it to any new telephone delivered technology that may come in
the future.
You only need to look at my home state, Texas, to see what they will do if
we give them their way. In 1999, the Texas Legislature, under competing
pressure from AT&T and SBC, our local Baby Bell monopoly, passed a law that
deregulated the monopoly. Here's what our local paper had to say about it.
"Texans would pay less for long-distance calls within the state and basic
residential rates would be locked in until 2005 under a bill in the House
that won approval late Monday night" 5/25/99 Austin American Statesman
What they didn't mention is that the same bill completely deregulated nearly
all of SBC's other services and let them charge whatever they want. What do
you think happened? I'll let the paper tell you what happened... remember,
the law was going to lower long distance and freeze basic residential rates.
"Texas Citizen Action, a consumer group, and the Gray Panthers, a group
representing senior citizens, released a study Wednesday that says a new
telephone law will cheat consumers of at least $1.1 billion between now and
2005" 9/23/99 AAS
(I'd like to point out that that's enough money to replace all of the soft
money the Republican and Democratic national parties raised in the same
period.)
"SBC Communications Inc. is raising pay phone rates to 50 cents for a local
call throughout its 13-state service area, including Texas." 7/7/01 AAS
"Southwestern Bell telephone customers will get hit with larger bills after
rate increases on more than 30 optional services, such as Caller ID and
three-way calling, and packages, go into effect Monday." 7/28/01 AAS
"AT&T Corp. long-distance customers will have to cough up an extra $1.95 a
month for a new "in-state connection" charge the carrier is implementing
Sept. 15 to make up for high statewide access charges, the company said"
9/7/01 AAS
(The law mentioned above specifically lowered the access charges. It didn't
raise them.)
"Less than a month after it raised rates for long-distance customers, AT&T
said Wednesday it was hiking rates for its local customers in Texas."
10/4/01 AAS
"Southwestern Bell is raising prices for optional services just six months
after its last price increase." AAS 1/16/2002
We now pay $9.50 per month for Caller ID in Texas. That service costs
around 60 cents per month to provide. There are bargain basement ISPs that
will give you unlimited access to the entire Internet for the same amount
the phone monopoly charges to send you a 30 character string with the name
and phone number of your caller. Our Public Utilities Commission used to
protect us from this type of abuse. But, the phone monopolies paid our
legislators to eviscerate the PUCs power and we're left with an unregulated
monopoly. Adding just that one service to a basic residential phone line
almost doubles the cost of the phone line. Although the Texas legislature
claims they "froze" basic residential service rates until 2005, the real
truth is that if you want anything other than a no frills telephone line,
your bill has exploded and there is nothing preventing it from going through
the roof.
We all know what it's like to have the Bells as the monopoly providers of
our service. What we've never before experienced is having the Bells as
unregulated monopolies. In America, we have a good example of how to
successfully create competition in a monopolized telephone market. It's
called Structural Separation. That's what we did when we broke up Ma Bell
into AT&T and the Baby Bells. I think that most intelligent people would
agree that the long distance market is much better today than when AT&T was
the only game in town. AT&T until very recently still charged 27 cents per
minute for a long distance call. What would structural separation, and the
real competition it creates, do for local service or for the Internet?
Well, it would probably make today's service and prices look just like
AT&T's 27 cent per minute long distance call.
Please do your part to prevent this outrage from becoming the law. Contact
your elected officials and tell them that you are tired of big companies
buying bad legislation with millions of dollars of campaign contributions.
They should oppose the Tauzin-Dingell bill and should investigate the FCC's
newly proposed rules that would allow the Baby Bells to exclude independent
ISPs from their networks. Competition is what makes America great, not
monopolization.
Here are the telephone numbers of several of Texas' elected officials:
U.S. Senators
Senator Kay Bailey Hutchison (R - TX)
(202) 224-5922
Senator Phil Gramm (R - TX)
(202) 224-2934
U.S. Representatives:
Sam Johnson
Plano
(202) 225-4201
Pete Sessions
Dallas
(202) 225-2231
Lloyd Doggett
Austin
(202) 225-4865
Chet Edwards
Waco
(202) 225-6105
Kay Granger
Fort Worth
(202) 225-5071
Charles A. Gonzalez
San Antonio
(202) 225-3236
Lamar S. Smith
San Antonio
(202) 225-4236
Tom DeLay
Sugar Land
(202) 225-5951
Henry Bonilla
San Antonio
(202) 225-4511
Martin Frost
Dallas
(202) 225-3605
Ciro D. Rodriguez
San Antonio
(202) 225-1640
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