Teletruth ALERT, Wednesday, August 17th, 2005

Links at the bottom of the release.

FCC to Kill Thousands of ISPs with 8 Year-Old Data!
Garbage-In, Kill-Competitors-Out.

The FCC, on August 5th 2005, put out a press release "FCC Eliminates
Mandated Sharing Requirement on Incumbents' Wireline Broadband Internet
Access Services". (link to release below). What this means is that the local Bell phone companies
no longer have to resell certain parts of their networks to Internet Service Providers
(ISP) — It is the "Re-regulation" of the Internet.

How many ISPs will be put out of business? How does this help innovation in
the US when you kill off thousands of innovative companies?

But that's only part of the story.

In 2004 Teletruth, with the National Internet Alliance (NIA), filed a "Data
Quality Act" as well as a "Regulatory Flexibility Act" complaint in
conjunction with the FCC's competition (unbundling) proceedings. Teletruth
found that the FCC's statistics pertaining to ISPs was created in 1997!

—That's 8 years old! That's before the Bell companies were providing DSL service.

This next paragraph is the FCC's definition of the ISP market from the

Triennial Review dated August 2004 — Notice that it is using
data that was created in 1997!

"Internet Service Providers. The SBA has developed a small business size
standard for Internet Service Providers. This category comprises
establishments "primarily engaged in providing direct access through
telecommunications networks to computer-held information compiled or
published by others. Under the SBA size standard, such a business is small
if it has average annual receipts of $21 million or less. According to
Census Bureau data for 1997, there were 2,751 firms in this category that
operated for the entire year. Of these, 2,659 firms had annual receipts of
under $10 million, and an additional 67 firms had receipts of between $10
million and $24,999,999. Thus, under this size standard, the great majority
of firms can be considered small entities."

We objected to this ancient data being used because critical decisions about the future of the Internet Service Providers, much less America's broadband deployment and economy are at stake.

Would you or your company use 1997 data to determine a current business decision? (Ed: stop laughing.)

However, the FCC responded, claiming that 1997 data is the latest they can use in 2005!

"We also reject TeleTruth's argument that the Commission violates the RFA by
relying on outdated 1997 Census Bureau data to identify the number of ISPs
potentially affected by our final rules in the IRFA. The 1997 Census Bureau
data were and still are the most current data available. According to
TeleTruth, data compiled by both the SBA and Boardwatch/ISP-Planet, an
ISP-focused periodical, indicate that the number of ISPs is close to 7,000,
rather than the 2,751 ISPs identified by the IRFA. Although TeleTruth cites
to higher numbers, the Census Bureau has not released the more recent (2002)
results for telecommunications providers or for ISPs. Thus, the IRFA in this
proceeding and this FRFA appropriately rely on the most up-to-date 1997
Census Bureau data and therefore comply with the RFA."

NOTE: The "RFA" refers to a required Regulatory Flexibility Act, which is an
act designed to make sure that small businesses have direct input into the
FCC's decision making process and that the FCC's decisions do not unduly
harm them. The "IRFA" and "FRFA" are "Initial Regulatory Flexibility Act
Analysis" and "Final Regulatory Flexibility Analysis". These analyses are
supposed examine the impact their decisions will have on small businesses.

What this says, in English, is that the FCC's entire data being used in the current broadband and competition proceedings was based on 1997 Census Data.

And when we pointed out to the FCC that more research, done by other sources,
including the Small Business Administration's (SBA) Office Of Advocacy, had updated data, the FCC rejected this information.

"Thus, in this case, the SBA has relied on a size standard based on the
number of employees working for an enterprise, rather than relying on its
own revenue-based standard for firms. We do not believe that case-by-base
departure from the SBA revenue-based approach to categorizing ISPs would be
appropriate."

To make it worse, the FCC states that its rulings only indirectly impact ISPs.


"First, we reject TeleTruth's contention that the Commission fails to assess
the impact of its unbundling rules on small Internet Service Providers
(ISPs), and that this failure violates the RFA. Although we understand that
our rules will have an economic impact in many sectors of the economy,
including the ISP market, the RFA only requires the Commission to consider
the impact on entities directly subject to our rules. The RFA is not
applicable to ISPs because, as we previously noted, ISPs are only indirectly
affected by our unbundling actions."

What garbage, to use a technical term.

The FCC has taken it upon itself to destroy small competitors. Virtually
every broadband ruling has been a nail in the coffin of the ISPs, the small
innovative companies that brought America to the Internet, not the phone
companies.

The FCC claims it doesn't regulate ISPs, but in fact, every action on
broadband has a direct impact on the ISPs. For example, the FCC does
regulate broadband. It controls the regulation on DSL, as it has been deemed
an "interstate" product. The FCC has also put most competitive broadband
companies (D-LECs) out of business, the companies that the ISPs worked with
to secure competitive broadband services.

In this decision, it is clear that the FCC has now pushed the ISPs off of
the public switched networks, networks that were funded by customers through
phone rates.

And worse, it is doing it with stone age data. The FCC now says it's OK to
use 8-year-old data for decisions in 2005 that will harm thousands of
companies, not to mention millions of customers. — How many companies
have already been put out of business because of 'reregulation' of the
public switched networks?

No wonder the FCC's lack of understanding helped in creating the Telecom and Internet crash in 2000. They were using data from before the Telecommunication Act of 1996 and the Internet was established.

And this FCC decision doesn't simply impact the ISPs. Every dial up customer
now has to stop using their own current ISP to switch to either a Bell
company or cable company if they want a faster connection. —This is not
competition. This is creating a duopoly through bad data.

Next Step:

Everyone, not simply Teletruth, should be outraged and ask the Congressional
Small Business Committees and the Small Business Administration Office of
Advocacy to stop the FCC from the wholesale destruction of an entire
industry --- with 8 year old data!

For more info contact:
Bruce Kushnick, Teletruth,
bruce@teletruth.org
Tom Allibone, Teletruth,
tom@teletruth.org
1-800-FYI-AUDIT

http://www.teletruth.org

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