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Gigabyte Media March Room
... for the freedom of choice and homeland security
For interviews or more information please contact: Frank Muto at 440-877-1321 or Cynthia de Lorenzi at 703-797-1888 x211 NEW!
WBIA In the news... WBIA in the News WUSA 9 News Washington, D.C. News.com America's Network ISP-Planet
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Small ISPs Hurriedly Plan for Future After FCC DSL Order Independent ISPs are pondering their business futures -- in a hurry -- following the FCC’s reclassification of wireline broadband as an “information service” last week. The order released the Bells from unbundling and common carrier requirements that let ISPs lease access at regulated prices. But ISP executives and industry watchers disagree on the intentions of the Bells and the sustainability of ISPs providing services beyond simple Internet access. ISPs were thrown by the “expeditious manner” of the FCC decision, Snappy DSL Pres. Faisal Imtiaz told us. “We’re trying to understand and absorb the consequences of it” before telling customers how they’ll be affected, he said: “We weren’t expecting to have to do this so quickly and under the gun.” To be prepared in 12 months, when the telcos lose line-sharing obligations, Imtiaz guessed Snappy will have to evaluate business models within 4 weeks. The FCC “met right in the heart of summer vacation” to make the decision, Patriot Computer Group CEO Cynthia de Lorenzi noted. She said Patriot’s wholesale provider, Covad Communications, has a “safe harbor” provision to protect its customers from spikes in wholesale rates, but smaller ISPs with direct contracts with Bells are more vulnerable: “I think they’re all stunned. They’re reeling.” “Ultimately it’s hard to say” what Bells wanted to accomplish by pushing for DSL deregulation, Kinex Networking Solutions Pres. Jim Garrett told us. Independent ISPs have been “some of the best customers” of the Bells, paying more for access than residential customers and not consuming tech support: “I’m not sure we know what the motive [for their DSL lobbying] is other than just to corner the market,” Garrett said. de Lorenzi said: “The Bells are hurting themselves too” by riding roughshod over the “worker bees” -- small ISPs -- that first developed DSL and now pay handsomely for access. “I personally believe they [Bells] think this is the best administration possible for eliminating as much regulation as possible, and they’re going to do everything they can while they can,” Garrett said. The order “is as clear as somebody can say, ‘Hey guys, pack up and go away,’” Imtiaz said. “In a very narrow view you can say, ‘Gee, it creates parity’... but in a larger view it pretty much undoes the 1996 Telecom Act.” Whereas the traditional telephone lines that served DSL were “under nobody’s control” in the past, “every single road in the U.S. now becomes a toll road,” with private entities the collectors, Imtiaz said. Imtiaz, a naturalized citizen, said the FCC decision is reminiscent of the vanishing govt.-run monopolies and duopolies he knows in 3rd-world countries. They're slowly opening up to competition through regulation, he said, while the U.S. is “going in the reverse direction.” de Lorenzi said the decision will make it more difficult for the U.S. to pressure other countries’ regulators to open their networks. Whether ISPs can adapt by providing content to subscribers is disputed. “I think it’s tough for a small ISP to deal in content,” Garrett said, saying the ISPs are in a poor negotiating position with content providers: “The economies of scale aren’t there.” Businesses serving mainly as access providers will “have to evolve or close their doors,” providing content or IT services to stay afloat, Imtiaz said: “Obviously we’re going to have to transition into focusing less on the access and more on add-on services.” The firm will probably sign deals with one or more content providers, he added. Once the order takes effect, 5 companies will effectively control content for a large swath of America, de Lorenzi said: “We’re going to have to have good faith with the Bells” that they won’t discriminate against certain content. An early ISP founder who sold his company during the “boom,” Garrett’s firm is a licensed CLEC and just signed a line-sharing agreement with Sprint. Kinex will start building a fiber network later this year, Garrett said, adding that small ISPs have “a wonderful opportunity” -- if unsought -- to scrap copper lines and install fiber in small communities that larger LECs are avoiding: “In my mind this is all working toward the end goal” of small ISPs building fiber. He called his entrepreneurial DSL peers “the geeks and gurus of IP,” but “a great many of them seemed to be overwhelmed at the thought of becoming a CLEC.” Fellow CLECs don’t seem as worried. Cavalier Telephone said its DSL service won’t be affected because it uses its own DSL equipment and network capacity: “This ruling further strengthens our competitive position and allows Cavalier to further invest in additional DSL services,” CEO Brad Evans said in a statement. The long-term effects of the decision include fewer “personalized products” for customers, Garrett said. “We do a great many things for the customers that the BOCs won’t do,” such as Web hosting, site scripting, and setting up business networks after the initial DSL setup. “It’s very difficult in the smaller towns... for anybody to do that kind of thing unless they are very diversified.” Telecom jobs in small communities will also migrate to other parts of the country and abroad, Garrett added: President Bush has “no qualms about a global economy and exporting technology jobs.” de Lorenzi said one ISP told her its bank called in the ISP’s notes shortly after the ruling. Broadband adoption will likely slow as Bells fight small ISPs and municipalities hoping to build their own networks, she said. “Conceivably” the spread of municipal broadband will improve the fortunes of small ISPs, as long as the Bells don’t fight too hard to prevent such arrangements, she said. Congress’s response to the ruling is far from certain, executives said. Legislators “will not be happy campers about this,” de Lorenzi said. Imtiaz doesn’t expect immediate counter-efforts from the Hill: “It’s hard to see because it’s such a complex issue that most of the legislators are basically looking at it and saying ‘huh?’” Cable and telcos have lobbied successfully with the message that “we’re going to bring broadband and we’re going to bring jobs” through deregulation, he said. de Lorenzi predicts a “downshift” in economic growth -- “I don’t care what the Bells say.” -- Greg Piper ### Small Businesses Hit by Telecomm Consolidation Dawn Rivers Baker The small ISPs and web hosting companies that primarily serve fellow microbusinesses are in danger of closing their doors, while the FCC smiles in approval July 25, 2005 — The regulatory landscape in the telecommunications industry is murky and complex, and the issues can often be confusingly technical. So perhaps it is not surprising that current trends toward reconsolidation that some say will take us back to the days of the government-sanctioned AT&T monopoly have not received as much attention in the small business press as might have been expected. In the simplest terms, SBC and Verizon are the giants in telecommunications with 75% of the local telephone market. They are seeking to merge with their closest competitors right now — SBC with AT&T and Verizon with MCI. That will give them dominance in the local, long distance and Internet service market. And, according to Cynthia de Lorenzi, CEO of the Patriot Computer Group, Inc. and co-founder of the Washington Bureau for ISP Advocacy (WBIA; www.wbia.us), an advocacy group for small ISPs, they also want to cut off access to their infrastructure to those smaller outfits. These behemoth telecommunications companies own the lion's share of the infrastructure in the U.S. and they were required to share access to that infrastructure under the Telecommunications Act of 1996. That allowed new, small firms to enter the telephone company business, for the most part offering service in local markets that improved products and services and drove prices down. Without that kind of infrastructure sharing, it would be virtually impossible for new players to enter the industry because the cost of building that kind of infrastructure from scratch is simply prohibitive. Under the same network sharing regime, a host of small ISPs and web hosting companies have emerged in recent years in response to the demand for Internet access and, particularly for small businesses, for an online presence. "Small businesses rely on small service providers," de Lorenzi told me during a telephone conversation last week. "Besides Internet access, they come to us for hosting, for charges that are reasonable, and for our expertise." Smaller ISPs and web hosting companies tend to better understand and sympathize with the issues of microbusinesses, and are more willing to seek out and provide products that are within their resources. And, of course, at a smaller company, a microbusiness owner is much more likely to get personalized service, something valuable in itself when it comes to an area like IT in which many microbusinesses have limited expertise. The WBIA fears that, in a post merger environment, the small ISPs will be run out of business by gigantic telecommunications companies that are even now lobbying to avoid having to share their infrastructure assets. And that will be very bad news for all those microbusiness customers now served by those small ISPs. According to an analysis performed by former Federal Communications Commission (FCC) chief economist Simon J. Wilkie, if AT&T and MCI are removed from the telecom landscape, SBC and Verizon will dominate the business market, controlling service in well over 9 out of 10 commercial buildings in their territories. The resulting virtually complete domination by each in its own region will fuel at least a 15 percent increase in wholesale prices for local access, in turn driving up retail prices to businesses by a similar amount. To add more fuel to the fire, the recent Supreme Court decision in the Brand X case — in which the court held that cable high speed Internet access is an information service rather than a communications service and, therefore, cable companies do not have the same requirement to share their networks under the Telecommunications Act — may have given those large companies ammunition. "We're concerned that the Bells will be emboldened to claim that they don't have to share their DSL lines. If they do that, I'm out of business," says de Lorenzi. The SBA Office of Advocacy has already weighed in with the FCC on repeated requests from these telecommunications big boys to be exempted from the network access requirement, advising them to do a better job with their Regulatory Flexibility Analyses by getting input from small ISPs. Unfortunately, the FCC has already shown itself to be one of the least small business friendly regulatory agencies in Washington. The FCC is also responding to the current climate in Washington, in which conservative ideology dominates and that ideology often assumes that regulations are bad. Sometimes, however, regulations are necessary, as in an industry in which there would be no competition without somebody to ride herd on the behemoths. Looking at it in a big-picture way, the WBIA and its allies contend that the potential consequences of further consolidation and concentration in the telecommunications industry and back peddling on pro-competitive regulations by the FCC will have far reaching negative consequences for the country and for the economy. Some of those consequences enumerated for me by Ms. de Lorenzi include rising unemployment, lack of choices in communications products and services, rising prices, a slowdown in the housing market, and more. Perhaps most disturbing is that the United States is already slipping from its once-dominant position in global information technology penetration, because these large companies are so busy trying to corner the market that innovation and expansion is left for the smaller, more entrepreneurial companies. Last month, the Organization for Economic Cooperation and Development (OECD) reported that the U.S. dropped from 10th to 12th place in the OECD report on broadband penetration. OECD reported that 12.8 percent of Americans subscribed to broadband service in December 2004 -- compared with 24.9 percent in world-leader South Korea and 19 percent in the Netherlands, which is was in second place. It seems clear that it is in the best interests of the country on a variety of different levels not to chase small companies out of the ISP business. Whether or not the FCC will figure that out and spare us all something of a catastrophe remains to be seen. ### ----------------------------------------------------- New Coalition Forms to Advocate, Educate on Open Network Access 7/8/05 By Greg Piper Communications Daily
After 6 months of meeting quietly, a coalition of ISPs, consumer groups and vendors has gone public with a mission to educate consumers about the upcoming Telecom Act rewrite. The Telecom Summit Ad Hoc Committee wants open access to Bell networks, saying that will offer consumers more choices. “The Bells orchestrated a beautiful lobbying effort,” but ISPs and sympathetic groups must match their efforts, Patriot Computer Group CEO and committee organizer Cynthia de Lorenzi told us. The summit group is choosing a “sexy,” less awkward name, she said.
The group is intentionally loose, de Lorenzi said: “We need another formal association in this town like we need another monopoly.” Members -- including CompTel/ALTS, Consumers Union, EarthLink and the Information Technology Assn. of America (ITAA) -- mostly are conducting their own efforts and cooperating where interests cross, not bound by more centralized entities’ “restrictive parameters.” Member funding is voluntary, but participation is crucial: “Their voice counts more than their dollars,” de Lorenzi said. She can’t name everyone “sitting at the table” because some have contracts with the Bells they don’t want to disturb.
“This whole issue of the role of ISPs in broadband is going to get reopened” following the Brand X decision, ITAA counsel Mark Uncapher told us. The Supreme Court appeal brought the lobbying process “to a halt,” but now “we’re in the first inning of what may be a multi-inning game,” he said. A 4-year rewrite would be good, de Lorenzi said. Uncapher noted ITAA members and other coalition participants are debating “a variety of approaches” to the regulatory regime. One is a “layers” approach proposed by MCI’s Rick Whitt, separating content and applications from conduit and transport in regulation.
House Govt. Reform Committee Chmn. Davis (R-Va.) has met with the group and he’s “very supportive of our view,” but efforts will focus more on customers and state issues, de Lorenzi said. “What collectively we want to do is a better job of making the public aware of the stakes of consumers,” Uncapher said. “We have a fully built out system; what we need is penetration” into “smokestack” communities ignored by the Bells, de Lorenzi said.
“Big business is behind us,” since it knows a bubble akin to the 2000 tech bust is building, due to a Bell stranglehold over networks, de Lorenzi said. The Brand X loss energized such groups to be more vocal, she added. ISPs will tailor outreach to customers as they see fit, Uncapher said. Some will be more political than others, he added.
----------------------------------------------------------------------------------- From National Journal's Tech Daily 6/6/05 New ISP Coalition Seeks To Preserve Competition by Randy Barrett A new coalition of independent Internet service providers (ISPs), vendor associations and public-interest groups has formed to fight for full competition in the high-speed Internet marketplace.
Federation of Internet Service Providers of the Americas (FISPA), and the Washington Bureau for Internet Advocacy (WBIA), among other organizations.
Cynthia de Lorenzi, CEO of Patriot Computer Group in Fairfax, Va., and a WBIA co-founder. "We can drive penetration where they want to go." Currently there are about 6,000 independent ISPs in the United States.
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