For a "Word" version of Complete Comments (with Footnotes)

For a "Word" version of Small TeleCom Business Impact Study (with Footnotes)


Before the

Federal Communications Commission

Washington, D.C. 20554


In the Matter of

Review of Regulatory Requirements for Incumbent LEC Broadband Telecommunications Services

Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers; Implementation of the Local Competition Provisions of the Telecommunications Act of 1996; Deployment of Wireline Services Offering Advanced Telecommunications Capability

Appropriate Framework for Access to the Internet Over Wireline Facilities

Inquiry Concerning High-Speed Access to the Internet Over Cable and Other Facilities

FCC Classifies Cable Modem Service As "Information Service"

Appropriate Regulatory Treatment for Broadband Access to the Internet Over Cable Facilities

Notice of Inquiry Concerning a Review of the Equal Access and Nondiscrimination Obligations Applicable to Local Exchange Carriers








CC Docket No. 01-337


CC Docket No. 01-338



 CC Docket 02-33


 GN Docket No. 00-185



 CS Docket No. 02-52


 CC Docket No. 02-39





Prepared By:


New Networks Institute for TeleTruth

Bruce Kushnick, Executive Director

C/O New Networks Institute

826 Broadway, Suite 900

New York, NY. 10003





PART III: The FCC Failed to Present Proper Documents or Analyses:

  • A Small Telecom Business Impact Study
  • 11) The ISP Marketplace……………………………………………....…………………………. 33

    12) Counting The ISP Small Business Market………………………….......……………………… 34

    13) Number of Online Customers………………………………………….....…………………… 35

    14) The Valuation, Revenues and Employees of the Small ISP Market………….........……………. 36

    15) Closing out CLECs and ISPs from Broadband……………………………………......………. 38

    16) The Commission’s Current Proposals Will Worsen, To Fix, These Problems………..........……. 38

    17) Current Broadband Marketplace --- ISPs Who Do and Do Not Offer DSL………......….……. 39

    18) CLEC Have Been Harmed by the Bell Companies………………………….......……….…….. 41

    19) FCC Has Failed To Perform Proper Analysis Of Impacts On ALL US Small ……….........…… 43

    Businesses --- The "Chain-of-Choice"

    20) Failure To Perform Proper Analysis Of What The Small Business Telecom Providers….............. 45

    Offer That Is Unique?

    21) Summary of Impacts to Small Business Customers, ISPs and CLECs…………… ........……… 46

    Endnotes……(Seee Word Document)



    New Networks Institute has conducted for TeleTruth an analysis of the likely impacts of some of the current proposals on small businesses. The Commission should (indeed, under the RFA, it must) consider this information — as well as alternatives that would be less harmful to small businesses — in reaching its final decisions on these various matter. Our analysis shows that if the current proposals are adopted:

    • Small competitive telecom companies could lose approximately $8 billion in revenue as customers — who cannot obtain broadband from competitive providers hobbled by RBOC intransigence — leave them and purchase whatever half-baked "broadband" offerings monopoly providers decide to roll out, or because ISPs cannot grow due to these constraints of selling broadband.


    • Over 1500 ISPs meeting the definition of "small business" are in jeopardy if these proposals go through as articulated in the NPRMs.


    • This will leave a minimum of 10-15 million people with the problem changing providers. In the case of small businesses that depend on specific ISP services, such as SDSL, web hosting and other services, this will cause serious problems.


    • The potential harm to small businesses and small ISPs is actually greater, given the financial stresses on CLECs in present market conditions. Because small ISPs overwhelmingly receive their connections to the local phone networks, as well as their dedicated connections to small business customers, from CLECs, the collapse of the CLEC industry will bring down significant numbers of ISPs as well.


    The FCC Documents Under Discussion (with our brief interpretation) are:

    • CC Docket No. 01-337 ---"Review of Regulatory Requirements for Incumbent LEC Broadband Telecommunications Services".
    • This NRPM proposes that the Bells will no longer have to resell their broadband plant to CLECs.


    • CC Docket No. 01-338, "Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers; Implementation of the Local Competition Provisions of the Telecommunications Act of 1996; Deployment of Wireline Services Offering Advanced Telecommunications Capability"
    • This NRPM states that the Bells will no longer have to unbundle their Broadband network elements for CLECs.


    • CC Docket 02-33 "Appropriate Framework for Access to the Internet Over Wireline Facilities"
    • This NRPM declares that Broadband is an Information Service and therefore doesn't have to be resold to competitors. It also can add/increase new taxes.


    • GN Docket No. 00-185 Inquiry Concerning High-Speed Access to the Internet Over Cable and Other Facilities.
    • This Docket requests comments on whether high-speed cable services is an Information Service and therefore all of the current proposed openings for competitive Internet will be closed.


    • CS Docket No. 02-52 Internet Over Cable Declaratory Ruling Appropriate Regulatory Treatment for Broadband Access to the Internet Over Cable Facilities.
    • This Docket declares high-speed cable services is an Information Service and therefore all of the current proposed openings for competitive Internet will be closed.


    • CC Docket No. 02-39 Notice of Inquiry Concerning a Review of the Equal Access and Nondiscrimination Obligations Applicable to Local Exchange Carriers"

    This proceeding proposes to eliminate equal access obligations just as the Bell companies are entering long distance.


    PART III: The FCC Failed to Present Proper Documents or Analyses:

  • A Small Telecom Business Impact Study
  • This Small Telecom Business Impact Study was created by New Networks Institute for TeleTruth.

    This section of these Comments provides a discussion of the current ISP (and CLEC) DSL marketplace. TeleTruth urges the Commission to consider this information in formulating its final decisions in these matters, as well as in RFA issues in these and future proceedings.

    We will focus on small Internet Providers because of the extensive amount of data already collected by New Networks Institute, including national surveys, filings, comments, articles, and law suits, among other items.

    We should also make clear the fact that TeleTruth is a customer coalition that includes small businesses, and small ISP and CLEC competitors. TeleTruth's board includes a number of ISPs and CLECs.

    11) The ISP Marketplace

    Internet Service Providers (ISPs) are mostly comprised of a rare breed of entrepreneurs who, at their own expense, clearly saw the need to supply customers with the foundations of the Digital Age -- Internet and web service provision, DSL services, and everything from e-mail to the creation of web sites. This group that has been the real innovators of our Digital Future, not the monopolies who supply local phone service, such as the Bell companies.

    And alongside of this marketplace has also been the growth of the Data CLECs ("D-LECs") and CLECs who offer local voice services, though many companies offer both voice and data services .

    As we will discuss: For the last 6 years,

    • The Bell companies have been continually harming the ability of ISPs and CLECs to offer DSL services over the local phone networks.
    • The Commission has largely failed to protect these small ISP and CLEC companies from ILEC refusals to abide by binding rules, and this lack of enforcement has slowed the deployment of DSL in America.
    • The harm to ISPs and CLECs is a harm to small business customers.
    • The ISPs and CLEC offer unique products that the Bells and Cable companies do not offer.

    First, we will discuss the size of the marketplace, including customers and revenues.

    12) Counting the ISP Small Business Market

    As the opening quote of this documents announces, the FCC's decision could destroy the entire ISP market, and TeleTruth as well as most analysts agree with that assessment. Therefore, it is very important to understand how many companies will be affected by the FCC's rulings.

    There are a number of sources that need to be discussed about the size of the market.

    The FCC's information was supplied by the SBA. According to the SBA, there were 2940 small ISPs. As we pointed out previously, this statistic appears to be from 1997, before the growth of the entire and Internet marketplace.

  • "41. Internet Service Providers. Under the new NAICS codes, SBA has developed a small business size standard for ``On-line Information Services,'' NAICS Code 514191. According to SBA regulations, a small business under this category is one having annual receipts of $18 million or less. According to SBA's most recent data, there are a total of 2,829 firms with annual receipts of $9,999,999 or less, and an additional 111 firms with annual receipts of $10,000,000 or more. Thus, the number of On-line Information Services firms that are small under the SBA's $18 million size standard is between 2,829 and 2,940. Further, some of these Internet Service Providers (ISPs) might not be independently owned and operated. Consequently, we estimate that there are fewer than 2,940 small entity ISPs that may be affected by the decisions and rules of the present action."
  • Another statistic we found from government sources was the published information for ALL ISPs in the Census. The new business identification codes (NAICs) that replaced the earlier (SIC) codes, shows that in the 1997 Census, there were 4,165 Internet Providers.

  • "NAICS 514191: Online Information Services This U.S. industry comprises Internet access providers, Internet service providers, and similar establishments primarily engaged in providing direct access through telecommunications networks to computer-held information compiled or published by others. The data published with NAICS code 514191 are comprised of the following SIC industry 514191"
  • On-line Information Services
  • Total Companies 4,165

    Small Business 2,940

  • This means that the Small Business ISPs who qualify would be approximately 70% of the ISP market in terms of total companies for the year 1997.

    However, there is a great deal of other data that the FCC should have quoted. For example, the most important source of ISP information is the ISP World's collection of ISP-market related companies and databases, including Boardwatch Magazine and ISP Planet, among others.

    According to Broadwatch's most recent survey of ISPs in March 2001, there were 7,288 ISPs listed in their directory.

  • "Last year, we started the process of updating the database by deleting double entries. Even though we deleted a number of companies that had double entries, our ISP numbers still grew by over 2,200. This year we took the next step. Over the past six months, we proactively took steps to update our industry information. From July 2000 to March 2001, ISPworld Market Analyst Tisha White scrubbed the ISP list to find those providers that are out of business, were sold or took the time to register but did not provide any information. Because of this effort, for the first time since the Directory was published in 1997, the number of ISPs we are reporting in North America is down. As of March 2001, 7,288 ISPs in North America have registered on our Web site." (emphasis added)
  • TeleTruth believes that for the year 2002, the answer lies somewhere between the government numbers and the ISP Directory. However, the FCC is making decisions based on old, inaccurate data, and considering the impacts that can occur, it is clear that they are in violation of the IRFA's mandate to give accurate data. Also, the FCC could at any time call the ISP Directory and confirm the information through various means. With billions of dollars, thousands of companies and millions of customers effected, this work would be critical to making an informed decision.

    13) The Number of Online Customers

    According to the National Telecommunications and Information Administration's ( NTIA) recent study, "A Nation Online: How Americans Are Expanding Their Use of the Internet", released February 2002, half of America, 143 million people, were online as of September 2001.

  • "More than half of the nation is now online. In September 2001, 143 million Americans (about 54 percent of the population) were using the Internet — an increase of 26 million in 13 months. In September 2001, 174 million people (or 66 percent of the population) in the United States used computers."
  • And who's handling all those Internet surfers? Another series of numbers from the recent 2001 survey of ISP Planet claims that the Top 25 ISP companies control 45% of the marketplace (including DSL conductivity). This includes AOL, MSN, AT&T, Time Warner, the Bell companies, Earthlink. However, the majority, 55% of the market is controlled by the other, mostly small ISPs ---- representing a whopping 77 million customers nationwide

  • "Of course, 54.2 percent of American's accessing the Internet and the World Wide Web do so through thousands of independent ISPs scattered across the country, which totals some 77.5 million subscribers nationwide."
  • NOTE: It is hard if not impossible to compare all of these statistics with rigor because there are missing pieces of information.--- what is the number of total accounts and how does it compare to the total user population or what is the number of customers who use more than one account, or families who all use the same account, etc..

    14) The Valuation, Revenues and Employees of the Small ISP Market.

    If the amount of customers or the total amount of ISPs is still not an exacting piece of data, then the amount of revenues, staff, or the valuation of these companies is also more analytical artwork than exacting science.

    For this analysis, we will use the Government supplied information, but with the caveat that that we consider their information to undercount, not overcount, the marketplace. According to the Census, 1997, the entire ISP market averages out to a small business --- representing 4165 companies with average revenues of $8 million dollars and total industry revenues of 33.5 billion dollars.


    Online Information Services, US Census Data, 1997

    Total Companies


    Total Employees


    Revenues Avg.


    Total Payroll


    Industry Revenues

    $33, 497, 299, 885


    $9,812, 706, 680

    And the valuation of these companies are also very large. The chart below, compiled by ISP Planet, shows that the value of Dialup customer to be $678 in March 27, 2002 though it has decreased steadily since the arrival of broadband.

    History of Subscriber Values

    (Source: ISP Planet)

    February, 2002


    January, 2002


    December, 2001


    November, 2001


    October, 2001


    September, 2001


    August, 2001


    July, 2001


    June, 2001


    May, 2001


    April, 2001


    However, the fact that one customer is worth approximately three years worth of service is a sign that losses to any company of Dialup customers is harmful.

    Out of these statistics what we see is that the ISP marketplace has been a fast growing industry made up of entrepreneurs. More work would be required by the FCC to qualify and quantify the size of the marketplace, though ISP World indicates that there are over 7000+ ISPs, almost all small business, who represent 75 million customers --- 1/2 of all online customers.

    Also, SBA found that in 1997, the total ISP market was worth $33.5 billion and paid payrolls of $9.8 billion. Based on the information presented by ISP World, this revenue figure could be double or triple that. If customers are counted and the valuations made of the Dial-up customer valuations, the total for this marketplace would be worth triple the total revenues --- a very large number.

    We will discuss the expected impacts these rulings could have on this marketplace in the next few sections. However, one thing is clear --- The FCC has No clue to the size and scope of the ISP marketplace today, and more research would be needed before even an educated guess could be made.

    15) The Current Market Analysis Missing --Closing out the CLEC and ISP from Broadband

    The TeleTruth Analysis: The current trend of customers is to leave Dialup and go to broadband, whether its cable modems or DSL. This is not a "new product" for customers, but it is still faster-better version what they currently have. "New Product" would denote seriously new applications, which today, because of the limitations of ADSL, the marketplace, while viable, is still not in revolutionary change -- just evolutionary change.

    Therefore, ISPs offering DSL has been and continue to be the most viable next step for a customers to use broadband. Also, it is clear that the choice of cable modem is also not a 'new product' but an enhancement to current web and Internet use. And customers who choose cable modems are usually doing it out of convenience vs a dramatic difference in service offerings.

    And so the FCC's current ruling harms ISPs and CLECs in that:

    • The first Broadband NRPM and Unbundling rules would limit the CLEC from getting the necessary broadband services to resell to the ISP.
    • In the actions that define DSL and Cable Modems as an Information Service, this would block the ISP from getting either the Wireline or Cable access for broadband resale.

    Which brings us to the question the FCC refuses to answer or supply any data for in their IRFA.

    • If the ISPs and CLECs are closed out of the broadband market places, then what happens to the entire industry -- the 70 % of the companies that handle approximately 50% of the entire ISP marketplace?

    And while the rulings may or may not happen, there is another critical issue that needs to be addressed --- The FCC today is not actively defending the rights of the small ISPs and CLECs and this has caused serious problems for the current industry's health and growth.

    16) FCC Has Not Acted to Fix ISP Problems, and These New NRPMs Do Nothing to

    Fix the Problems.

    A true IRFA analysis about small business telecom competitors would conclude that the current FCC is in violation of the Telecom Act and all of its provisions.

    To date, the FCC has not properly defended small business rights, especially the ISP and CLEC markets. In fact, the industry has consistently presented data to the FCC to defend the small businesses and it has fallen on deaf ears. Dave Robertson, the head of the Texas ISP Association, (TISPA ) recounted his meeting with Chairman Powell and senior staffers at the FCC Enforcement Bureau.

  • "The meeting was Tuesday May 8th, 2001. In a nutshell, all the "bad acts" submitted to them to date have resulted in exactly "ZERO" dollars in fines, and little delay in their 271 approvals for the Bells to jump into the long distance market. We asked for something blatant as handwriting on a wall as to the future of the complaint process as we are approaching it. We got it. WE SHOULD EXPECT NOTHING FROM THE INFORMAL COMPLAINT PROCESS. We should expect nothing from any complaints we have submitted to date.

    "A couple of weeks ago we met with a senior person in the ENFORCEMENT BUREAU. After a one-hour meeting and receiving some heartfelt empathy for the plight of ISPs and the consumers who are being victimized by the illegal, anti-competitive behavior, I suggested that our best move might be to just jump out a window. He suggested we might want to consider throwing a chair out of the window first, so we wouldn't get cut on the glass as we jumped."

  • In fact, The Texas ISP Association presented an entire book of material showing violation after violation. To read this 113 page series of violations see:

    Another state ISP association, this time in California, is now fighting to have DSL oversight moved out of the FCC completely. A Complaint by the California ISP Association, CISPA, won the first round against SBC/Pac Bell. The California PUC has ruled (March 29th2002) that they have jurisdiction over DSL and they are willing to hear a case that Bell is discriminating against small ISPs who want to sell DSL in California.

  • "This complaint seeks to enjoin SBC subsidiaries Pacific Bell and SBC-ASI from illegally discriminating against and refusing to provide Internet Service Providers ("ISPs") not affiliated with SBC and their customers with reasonable and adequate digital subscriber line ("DSL") transport services, on which services California consumers increasingly rely for high-speed Internet connections, and over which SBC-ASI has a virtual monopoly in most of California.

    "Through this unlawful denial of equal and adequate DSL services to independent ISPs and their customers -- conduct that violates California public utility law and the decisions of the California Public Utilities Commission ("CPUC") -- Pacific Bell and SBC-ASI are seeking to establish SBC affiliates, such as Pacific Bell Internet and Prodigy Communications Corporation, as the sole significant providers of ISP services that utilize DSL transport in California. SBC, through its California subsidiaries Pacific Bell and SBC-ASI, is thus seeking to leverage its control over DSL infrastructure into a new monopoly in California over both the provision of broadband Internet access and the delivery of Internet content, thereby fundamentally limiting consumer choice and eliminating the diversity of services now offered by independent ISPs. "

  • There are thousands of other documents, including filings, Comments, etc., at both the state and federal level that show that the small ISPs and CLECs are regularly being harmed and that enforcement is totally missing.

    An article "Disconnect How Bush and Michael Powell are Killing the New Economy. And how to turn it around" by Karen Kornbluh that appeared in Washington Monthly, Oct. 2001, lays out how Rhythms, a bankrupt CLEC who provided DSL with their affiliate ISPs, was harmed by this lack of enforcement.

    More recently, another Washington Post article, "Cheating or Competing", April 12th, 2002, tells the story of how other CLECs, including Cavalier and Ntegrity, that offered local phone competition had a litany of problems that caused the local Bell monopoly.


    17) Current Broadband Marketplace ----- ISPs Who Do and Do Not Offer DSL

    New Networks Institute's surveys of Internet Providers gives us a glimpse into the FCC's current handling of ISPs and we need to bring this into the analysis. According to our nationwide survey, approximately half of ISPs offer DSL today.


    ISPs Who Offer DSL, 2001

    • 57% Offer DSL
    • 71% of those who offer DSL do it through a CLEC
    • 43% do not offer DSL,

    A little over half (57%) of the responding US ISPs offer DSL. However, it is clear from this survey that many ISPs are being blocked from offering DSL, or have stopped all together for a number of reasons. As the exhibit below shows, of those that do not offer DSL, the primary reasons are: (Many ISPs had more than one reason for the problems.)

    • 59% of ISPs said that the Bell's pricing to ISPs does not allow the ISP to earn a profit,
    • 35% who do not offer DSL said that there was no competitive phone company alternative
    • 35% stated that the phone companies' overall treatment of their services was "sub-standard" in terms of getting installations or that there were serious problems with the phonelines.
    • Primary Reasons the ISPs do Not Offer DSL
    • 59% state that they do not offer because it is unprofitable
    • 35% did not have a viable alternative, or the CLEC went out of business
    • 35% had line problems or problems with an uncooperative local company.

    Service problems caused by the Bells can be so bad that the ISP can not offer a quality product. As one Texas ISP states:

  • "We tried but stopped because of installation delays, circuits wired wrong and circuits that did work but were constantly going down. Bell was killing our business and giving us a bad reputation by saying the problem was ours. We had to pull the plug and asked all customers to find an alternative."
  • The harm caused by the Bell companies means that many ISP customers will not have the ability to use their ISP for DSL. As one ISP wrote:

  • "The complexities created and the poor level of cooperation from our phone company makes this a losing business proposition. We are not expanding the business until we see changes that will allow us to compete fairly."
  • The prices and handling of the Bells resale of DSL to the ISPs has also played a factor in harming the ISP's ability to compete. As one Texas ISP put it:

  • "We are no longer able to add new DSL services in the Southwestern Bell (SWB) area as SWB is trying to force us to sign a new, unreasonable contract. SWB is threatening to turn off our existing SWB based DSL customers after 1/1/02 if we do not sign the new contract."
  • The Texas ISP Association filed a Complaint over this issue, and as we mentioned, there is currently another battle being fought by the California ISP association (CISPA).

    Sadly, this situation is not new. In our Nationwide ISP Survey of 2000, the same issues were prevalent dealing with broadband. This exact same theme was echoed by a Washington ISP who uses US West.

  • "US West is finally beginning to offer DSL in our service area (a very small part of it) we are unable to offer it. They have cherry picked and so diluted the market there is no economical way for us to enter the current or projected market and compete. US West and the other ILECs are SELLING BELOW COST. The words 'predatory pricing' keep echoing in my mind."
  • 18) CLEC Have Been Harmed by the Bell Companies.

    Most industry analysts believe that the actions at the FCC will harm the DLECs, the competitive companies that handle DSL and Data services, and the CLECs, who offer both voice and DSL services. Since most of these companies are dwarfed by the Bell companies, the industry is comprised of mostly small independent companies. And it is also clear in previous quotes --- the FCC does not have a clue about the number of small companies vs the larger ones.

    However, there are three important issues dealing with CLECs regardless of their size:

    • First, the CLECs will be harmed by the decisions in these proceedings --- in the case of the resale of broadband, or the definition of DSL as an information service, these rulings would stifle these companies ability to grow.
    • Secondly, the ISPs are also inextricably to this marketplace because ISPs resell the DSL from these CLECs. Companies, such as Covad, Focal, or New Edge Networks all have ISPs as customers who offer the CLEC DSL bundled with their own ISP services. So if the CLECs go out of business, the are numbers of ISPs who will be dragged down and not have any other provider to go to, since the Bells will control their DSL and the ISPs will be restricted from the cable networks. Large ISPs may fair better than smaller ISPs, and this analysis is of course important -- but missing.
    • Thirdly, there are the small business customers of these businesses -- the small businesses that depend on these companies.

    The current situation is not pleasant for the CLECs. The FCC has not enforced the laws.

    As we discussed in the ISP section, the laws are not being enforced -- and this is for both voice as well as current DSL deployments. The situation is not new either. Covad Communications, a CLEC that sells competitive DSL, testified in front of the Massachusetts Department of Telecommunications and Energy (DTE) that the Bell caused problems are continuous -- everything from not completing the wiring installation to playing favoritism with its own DSL product. (NOTE: Bell Atlantic Massachusetts is now Verizon.)

    • "Bell Atlantic fails to complete office wiring on time;
    • Bell Atlantic fails to complete loop installation work (activities in the field) on time;
    • A significant number of loop orders require multiple dispatches.
    • On average, it takes nearly 40 days for Covad to provide DSL service to its end users.
    • The primary reason for this long interval is BA-MA's (Bell Atlantic-Massachusetts)
    • failure to complete loop installations on time. This interval starkly contrasts with the
    • interval BA-MA promises its DSL customers. BA-MA has promised its DSL customers
    • service in 7-10 days."

    Hundreds of CLECs and ISPs have gone out of business over the last year. Clark McLeod, Chairman and CEO, of McLeod USA testified at "Competition in the Local Telephone Marketplace", a Senate Commerce Committee hearing on June 19th, 2001. He clearly stated that the local Bell monopolies have not opened their networks to competitors and the lack of enforcement of the current laws has harmed the entire CLEC business.

    Mr McLeod stated:

  • "Local competition has developed much slower than long distance competition. The reason is that the Bell companies have successfully denied competitors equal access (both economic and functional) to their local network."
  • His point of view is that the networks are not open and there is no "equal access" today.

  • "The answer for local competition is to mandate equal access and enforce it. Unfortunately, there is not equal access today, either economic or functional. Economic equal access does not exist today, because competitors are not getting what they pay for. Competitors pay for 100% service from the Bells but receive far less."
  • And he believes that without fixing the current Bell caused problems there will not be an


  • "Competitors, after spending billions of dollars, have averaged a 1% marketshare gain per year. If you extrapolate, there will be no one is this room still alive by the time we have meaningful local competition. And in fact, competition may die enroute. Congress needs to finish what was started in 1996 and take action now to mandate equal access and enforce it."
  • If the harm to the CLEC market continues and they are restricted from using the customer-funded wireline networks, then not only will the CLEC markets be harmed, but also the small ISP and their customers will also be effected. To read more about the problems in the CLEC markets see:

    19) The FCC Has Failed To Perform A Proper Analysis Of Impacts On ALL US Small Businesses --- The "Chain-of-Choice"

  • Violation: The FCC is in violation of not providing an impact to the small business customers of these companies. --- "The Chain-of-Choice"
  • A "class" of small business that is totally missing from ALL of the IRFAs are the small businesses that depends on these ISPs and CLECs --- The "Chain of Choice". The ISP and CLEC companies are not the only loser if the FCC creates a duopoly. The duopoly will block choice, innovation, and the small businesses across America are the losers. The "Chain-of-Choice'--- the small business customer, the ISP and the CLEC all are partners in services. And all of them in fact depend on using the phone networks supplied by the monopoly provider. If the ISP or CLEC has a problem caused by the local phone company, it also effects the customer.

    The FCC writes:

  • "Through this proceeding, the Commission intends to further its goals of encouraging the ubiquitous availability of broadband to all Americans, promoting the development and deployment of multiple broadband platforms, fostering investment and innovation in a competitive broadband market, and developing an analytical framework for regulating broadband that is consistent, to the extent possible, across multiple platforms."
  • However, the FCC in no way encourages competition and uses of the local networks. Instead the FCC talks broadly about platforms --- though they offer no proof that their plan will encourage broadband, foster investment or innovation.

    The FCC has failed to identify the fact that it has been the independent ISP and CLEC that have created the Digital Age, not the Bell companies--- and it is best to have many companies use the wireline networks, not just the Bell companies. As we previously mentioned, it was the independent ISPs and CLECs and entrepreneurs who are the innovators, bringing to marketplace web sites, Internet , email, web hosting and a host of other innovations. The Bell companies were not responsible for the web or Internet, have repeatedly filed to charge more for these services and have done everything possible to eliminate the primary drivers of innovation and the distribution of these technologies.

    And we have documented in numerous places the fact that the Bell reneged on all of their fiber-optic plans to the home -- even when they were given relaxed regulations and money to build these new networks.

    The ISPs are smaller local firms that have not lost sight of customer needs, and as a result, will usually deliver a higher-quality product. If this segment of the industry does not survive, then the entire telecom and tech sector is hurt, and the American public is left with no choice but a monopoly product with little innovation, cost savings, or quality customer service.

    Additionally, a survey conducted by NetAction of customer satisfaction of DSL, (released 7/25/01) clearly showed that competitors have a smaller percentage of complaints as compared to the Bell company services.

  • "Broadband users who get service from competitive DSL providers or cable companies have a smaller percentage of complaints than DSL users served by the incumbent regional Bell monopolies, according to a NetAction report on consumer satisfaction."

    "In general, the Bells' customers had to wait longer to have service installed, were more likely to have been billed before service commenced, and are less satisfied with technical support and customer service,"

  • Once again it is clear that customers will lose choice and quality services if the Bell companies succeed in harming competition.

    20) Failure To Perform Proper Analysis Of What The Small Business Telecom Providers Offer That Is Unique?

  • Violation: The FCC is in Violation of the IFRA for not examining the unique services the competitors offer that the Bells do not.
  • Voice over IP and SDSL are just two innovative areas that the Bell companies are blocking and harming. And yet they are services and the essential technologies for the small business.

    SDSL is the two-way DSL product that neither the Bell nor the Cable companies offer and it is the small business enabler-- the lower cost alternative to small company high speed services. The Bell companies offer two alternatives to broadband -- a "T1", which is an expensive business service that comprises of a bandwidth the equivalent of 24 lines--- and can handle both voice or data calls. The other service is ADSL, which is essentially a one-way product for residential use.

    Covad and other competitors with their ISPs offer an in-between product -- SDSL, a two-way product that is a low-cost equivalent for a small business of the more expensive T1. The Bells will never seriously offer this product because it cannibalizes their T1 service. And the cable companies do not offer this service or will with any rigor for years.

    Therefore, there is a strong reason for the ISPs and CLECs to exist to deliver new, innovative products that the other monopolies will not offer --- and a duopoly will never fulfill.

    Voice over IP -- Another interesting fact is that the Bells ADSL product has serious flaws as compared to the Competitor product. The current Bell product has a technical glitch that makes it hard to use "voice over IP" services, the innovative competitor to regular voice phone services that uses the Internet as its network to deliver voice calls. It can also block streaming video because of the service limitations. The Competitive DSL and SDSL products do not have these problems.

    The FCC is in violation of the IRFA for not including these new technologies brought by these small companies as having an impact on the overall health of the US.

    Markets that are not covered by the Bell or Cable Companies. --- In the numerous discussions of the Bell Companies and Cable companies becoming the Competitive duopoly, one of the most overlooked items is the fact that there are many rural areas of the country where the competitive local phone companies -- or even the Internet providers, have been the active force to deliver dial-up services and broadband. For example, New Edge Networks provides broadband to smaller markets and serves over 100 markets with NO broadband alternative Baby Bell, Cable or other service provider.

    Another case is the Willowbrook Metropolitan District in Summit County, Colorado, a geographic area not served by the ILEC DSL (Qwest) nor by the cable modem company (AT&T). In fact, the Ruby Ranch Internet Cooperative Association was formed to deliver services to this area and it has been a long struggle to get US West to actually give these independent ISPs the "subloops" which are needed to connect the DSL technology, known as "DSLAM" to the subscriber homes. (See which describes this independent groups' process to give these underserved customers service.) The Coop found that the technology part was easy... It's getting access from the local monopoly that is the hard part. It required the group to file an informal complaint with the FCC, and required arbitration from the state Commission.

  • "By far the biggest challenge faced by the Coop, a challenge that dwarfed any of the Coop's technical and financial challenges, was gaining access to subloops from Qwest under the Telecommunications Act of 1996. (The subloops are needed to connect the DSLAM to the subscriber homes. The buried telephone cable in our neighborhood has some three times as many subloops as are actually needed for voice service, and the subloops we wish to rent are among the hundreds of spare subloops which otherwise would generate no revenue for Qwest.) The course of negotiations was such that the Coop found it necessary to file an informal complaint with the Federal Communications Commission and subsequently found it necessary to pursue arbitration before the Colorado Public Service Commission ("CoPUC")."
  • 21) Summary of Impacts to Small Business Customers, ISPs and CLECs.

  • Violation: The FCC is in violation of the IRFA for not providing an analysis about the harm to investment, revenues, jobs, and other tangible and intangible impacts to the ISP and CLEC market segment, as well as the number of small business customer issues.
  • As we have demonstrated, the current environment is harming the ISPs and CLECs and these new laws will put the nail in the coffin. NNI estimates that the majority of small ISPs and CLECs will be harmed, costing billions of dollars of revenues, jobs, etc.

    Using the data supplied by the SBA on these companies, of the 2940 companies, we expect over half to have impacts, including the closing of their business. Therefore, we are looking at approximately 1500 companies to have serious impacts on their business. Is this acceptable?

    On the revenue side, if the we expect

    • approximately $8 billion in loses, potentially more, as the number of customers leave dial-up and go to broadband.
    • This will leave over approximately 10-15 million people with a problem of having to get another provider. As we point out, in the case of Small businesses who depend on specific products, such as SDSL, web hosting and other services, this will cause serious problems.

    Secondly, the recent collapse of the CLEC market which was in part caused by the Bell companies will continue because the small CLECs will be unable to purchase needed network services. This will also effect the entire segment from investment and capital, not to mention the ISPs and customers.