Friday, July 27, 2007
Calling in an airstrike on competition
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Barbra Lisa Downey Hood
Hood, of Chesapeake, is an engineer and community leader in Southeastern Virginia.
Scorched earth: The words generally bring to mind villages and crops burnt, wells poisoned and bridges destroyed to slow or stop enemy forces on the field of battle. However, in today's information age, it might be your friendly phone company that is scorching the earth -- make that your pocketbook -- killing off broadband competition by denying competitors access to the public phone network through murky regulatory proceedings and even outright destruction of the network itself. And when the dust clears, consumers are likely to suffer.
To understand the latest tactic in this battle, we begin with a little-known legal loophole known as "forbearance," which allows the Federal Communications Commission -- in markets where competition for phone and Internet service is well-established -- to forbear enforcing rules that require Bell phone companies to lease access to the public phone network to competitors at regulated rates. The forbearance clause is a shrewd way of making pro-competition regulations responsive to changing market conditions -- far better than just allowing the regulations to lapse after a set time.
Nevertheless, it appears as if Verizon is using the forbearance clause as a quiet, back-door way to kill the little competition that exists here in Virginia for business phone and Internet service.
The phone company has petitioned the FCC, stating that, unless the commission rules otherwise, Verizon will assume that it no longer has to provide access to the public phone network to competitors offering services to small- and mid-sized businesses. To win this petition, Verizon must demonstrate overwhelming evidence that the market for business service in Virginia is competitive.
With incumbent phone companies controlling 75 percent of the business markets in their footprints, the phone company clearly doesn't have a leg to stand on. Verizon tries to argue that future, hypothetical competition from cable companies, which don't currently serve business customers, justifies relaxing regulations in its favor.
Normally, this would be the point at which the pro-competition FCC -- which recently increased competition for cable TV service by easing Verizon's entry into that market -- would reject Verizon's petition outright. However, Verizon may have found an unlikely ally in the FCC, which appears to be prepared to turn a blind eye and cut phone and Internet competition off at the knees.
It might be difficult to believe, but it's happened before. In a controversial ruling that is being challenged in courts, western phone giant Qwest was actually granted forbearance in limited markets; immediately, the largest independent phone company, McLeod Communications, announced that it was looking to sell its operations or simply cut its losses and exit the market.
In Virginia, Cavalier Telephone has made it clear that, should Verizon win its forbearance petition, it will likely exit markets like Virginia Beach, where it would leave more than 1.5 million customers with nowhere to go but Verizon.
Startling evidence also shows that exploiting this loophole isn't an isolated act but is instead part of a quiet, take-no-prisoners campaign to eliminate existing broadband competitors and, more important, future ones that will rely on wireless transmission. Trade publications have reported that Verizon has even started destroying the publicly subsidized telephone network as it installs its new fiber-optic lines, thereby foreclosing the ability of any new competitor to interconnect through the networks that are left standing.
It seems as if Verizon is silently ensuring that all communications have no choice but to travel through their company lines.
This could spell disaster for local entrepreneurs who depend on competition to lower overhead costs -- studies estimate millions of dollars each year -- as they compete with large corporations and chain stores that get bulk discounts based on their size. Faced with higher operating costs, local businesses will be forced either to raise prices and lose market share or lose money. Consumers will feel the effects as local businesses that cultivate personal connections with customers disappear, replaced by corporate-controlled chains, megastores and big business.
Congressional leadership that helped author the forbearance clause has sent a stern letter to the FCC, spelling out the clear and rigorous conditions the commission should use in evaluating any forbearance petition. It is clear that Verizon doesn't meet these requirements. However, with the FCC handing Verizon the keys to the city gates, it seems that besieged small businesses don't stand a chance.
