NTIA PROBES BROADBAND POLICY, QUIZZING INDUSTRY ON DEPLOYMENT

Industry, academic and consumer group interests laid out for NTIA regulatory tightrope of policy issues that face Bush Administration on broadband policy Fri., including whether unbundling obligations should be imposed on Bell companies for new investments. NTIA Dir. Nancy Victory said at opening of day-long -- and frequently spirited -- discussion that meeting was part of “ongoing efforts” to obtain more information on broadband issues as Administration moved toward policy in that area: “This is not the last chance for people to weigh in on issue.” Industry representatives sparred over how far govt. should go toward mandating cable open access and role that regulatory restrictions played in providing incentives or hurdles to more capital investments. Meeting was first major policy forum over which Victory has presided since taking over agency in late Aug.

Panelists grappled with goals of broadband deployment, particularly in historically underserved rural areas. Deploying broadband access to significant percentage of households, regardless of platform involved, will require companies to make additional amounts of upfront investments, said Intel Communications Policy Dir. Peter Pitsch. Reaching 60% target for broadband access is “going to require billions of dollars in additional investments up front to make it possible,” he said. While “sensible procompetitive environment” is best way to make that happen, he said, “unbundling is a very intrusive form of regulation. It’s not regulating prices.” Issue of whether new overlays of fiber deployed by facilities-based providers would be required to be opened to competitors, rather than just legacy systems, “is one of the biggest issues we have to wrestle with today,” Pitsch said.

Verizon Asst. Vp-Internet & Technology Issues Link Hoewing said Verizon Senior Vp Thomas Tauke recently addressed issue with idea of “rational regulation.” That proposal would entail fair pricing for and CLEC access to incumbent facilities while ensuring that Bells could charge competitive, instead of Total Element Long-Run Incremental Cost (TELRIC) prices for CLEC access to newly deployed infrastructure. “We haven’t fleshed it out totally,” Hoewing said of idea. “We don’t think you should require unbundling” of that new infrastructure. Big challenge is how to come up with policy “that goes beyond where we are today,” Hoewing said. Financial downturn in telecom markets served as backdrop to much of policy discussion. “We are getting to the point where we have to listen to what the financial markets are saying about this current regulatory policy,” said BellSouth Vp-Executive & Regulatory Affairs Robert Blau. Particularly in competition, message of markets has been that regulatory policy “is not working,” he said. “We are getting to the point where the burden of persuasion” should be on those who are seeking market access.

Discussion turned frequently to extent to which competition either hadn’t occurred in last mile or to which consumer uptake in certain areas for DSL or cable modems hadn’t been as fast as expected. While network areas such as Internet backbone have multiple providers, last-mile access “is still essentially a noncompetitive market,” EarthLink Vp- Law & Public Policy David Baker said. “While cable is no longer a de jure monopoly, it is still a de facto monopoly,” he said. “We need to encourage more than just platform-to- platform competition.”

Morning session focused on demand and supply issues in broadband rollout. “This meeting is going to be one in a series of ongoing efforts to obtain more information,” Victory said. Forum is part of Administration effort to gather information on what role -- “if any” -- govt. should play in that process, Victory said. She was accompanied by several other Administration members, including Asst. Commerce Secy. for Technology Policy Bruce Mehlman. Questions Victory and other Commerce Dept. officials raised included price points at which consumer uptake can be accelerated, how govt. could help bolster consumer demand, whether policy goals on competition should focus exclusively on facilities-based services or combination of others. Morning session focused on “key” questions on pace and scope of broadband deployment, including: (1) Whether there was pent-up demand for broadband that wasn’t being met. (2) Whether there were technical or economic roadblocks to wider deployment in rural America. (3) Whether “killer applications” were waiting in wings that would increase demand in near future.

Several panelists stressed role that govt. could play in stimulating demand for broadband services or greater public acceptance rate. “Where the government can play a role, and where it hasn’t yet, is on the demand side,” Focal Chmn. Robert Taylor said. Several industry representatives said economies of scale played significant role in reducing end costs to consumers, which in turn spurred greater demand. Precursor Group CEO Scott Cleland emphasized extent to which demand already existed, but said supply via broadband pipes must catch up. Govt. policies such as Internet tax moratorium have been designed to help enhance demand, he said. Through hands-off regulatory stance, “the government has enhanced demand in extraordinary ways. You won’t find another industry where the government has stood on the scale to encourage the development of demand.”

One problem with relaxing unbundling requirements for new fiber investments is that it potentially limits choices for consumers to those covered under Bell company’s incumbent infrastructure, said Vinton Cerf, senior vp-Internet architecture & technology for WorldCom. Henry Geller, former NTIA administrator, said that among thorny policy issues that remained for cable open access was affiliated ISPs’ access versus those that haven’t signed agreement with cable operator. “There has got to be a proceeding on this,” he said, noting that issue isn’t likely to be resolved in Congress and FCC has been “very reluctant to solve.” Gene Kimmelman, co-dir. of Washington office of Consumers Union, made distinction between deployment of broadband services and actual service availability. “I think the history of figuring out deployment from a governmental point of view is an unbelievable morass,” he said. “There’s the question of not only whether there’s enough investment. There’s the question of whether the government would change the policy if you did invest -- or if you didn’t invest -- so there’s the whole gaming element that’s added to the mix.” Limited structural intervention when there is market power over transmission “is appropriate” stance for regulators on service side of broadband policy equation, Kimmelman said.