Posted on 07/14/2002 10:39:42 PM PDT by HAL9000
WASHINGTON -- Declaring the telecommunications industry in a state of "utter crisis," the chairman of the Federal Communications Commission suggested his agency could allow a Baby Bell to take over WorldCom Inc., a combination once seen as unthinkable, Monday's Wall Street Journal reported.A merger of a large regional phone carrier and the nation's second-largest long-distance company would reverse the FCC's position on such deals. It could also revive the spirit of AT&T's monopoly before the 1984 court-ordered breakup that created the regional Baby Bells, by allowing one company to control huge swaths of both markets.
But in his first public comments on the unfolding WorldCom scandal, FCC Chairman Michael Powell said the industry's battered, debt-ridden condition now leaves regulators little choice but to consider such options, especially if the alternatives would disrupt phone and data service to WorldCom's 20 million customers. To keep WorldCom's operations stable, he also called for the government to continue its billions of dollars in federal contracts with the company, rather than pull back as some White House officials have suggested.
Mr. Powell cautioned that a Bell's bid for WorldCom would still be far from certain to win regulatory approval. But one remedy for the broader industry's ills, he said, could be major consolidations along the lines the defense industry went through in the 1990s.
"There are plenty of doctrines in antitrust and competition policy that would take into consideration the duress and state of the market," said Mr. Powell, who in the Clinton administration was a top official of the Justice Departmen's antitrust division. "If a Bell company brought a deal to us, that would certainly be part of the consideration."
Just five years ago, then-FCC Chairman Reed Hundt helped sink a potential $50 billion merger between the Baby Bell SBC Communications (NYSE: SBC - News) Inc. and AT&T Corp -- still the leading long-distance carrier -- by publicly labeling such a combination "unthinkable" because of its size.
A deal between a Bell and WorldCom also could lead to further consolidation as the other Bells scrambled to acquire AT&T and Sprint Corp. as a way of keeping pace. Mr. Powell, however, suggested that Bells probably would have trouble affording such acquisitions.
Damage to the telecommunications sector, the FCC chairman said, extends far beyond ailing companies such as WorldCom, Global Crossing Ltd. and Qwest Communications International Inc. Even relatively stable companies such as Verizon Communications Inc. and SBC face huge challenges now that lenders are extremely hostile to telecom companies.
It's odd how the feds are doggedly pursuing Microsoft for being a monopoly - which it's not - while ignoring the blatent antitrust violations of the Bell monopolies. I can understand why Clinton didn't go after them - they gave him millions (e.g. SBC's $500,000 donation to the Clinton library). But why is the Bush administration permitting the illegal behavior of the Bell's to continue?
This is a terrible idea, and the person who is chiefly responsible for the current crisis is FCC Chairman Michael Powell himself.
It's predictable to anyone who has followed his plans to destroy competition in the telecommunications industry that WorldCom should be sold off to a Bell company. It's all part of Michael Powell's plan - he is determined to reduce the industry down to four or five monopolies, even if it drags the nation's economy into a major depression.
Deeper entrenchment of the Bell monopolies will not restore health to the tech sector. What's needed here is competition.
Possibly is a bad idea. I can see much that could go wrong, though allowing WorldCom's network to go dark would be catastophic.
However, I think most of the blame goes to Allen Greenspan. He lead the Fed in ratcheting up the interest rates which killed capital intensive businesses like telecom (which spend huge amounts of cash to lay fiber, DSL, cell towers, wire neighborhoods and cities etc) and also killed the most of the growth in IT capital equipment (chips, servers, memory, drives, etc.) which fed the need for communication.
Prior to Y2K, the Fed pumped cash into the system to keep it liquid to avoid any panic for runs on banks, but the banks loaned the money out, and much of it found it's way into the economy and market. The dot coms heated up (many foolishly) and Allen felt he had to hammer them, but interest rates were his only tool, and he killed telecoms and IT in the process.
But Greenspan is responsible for the economic climate that made the problem worse and fixing it very difficult.
The existing capacity is not being used because the Bells refuse to upgrade their "last mile" from the archaic voice-grade connection to a modern standard until the the competition is driven out of business. Most of the companies that built these new networks, like GlobalCrossing and WorldCom, are on their last leg because the Bells have failed to deploy the last mile.
The Bells have largely accomplished this by violating the Telecommunications Act of 1996 that requires them to allow competitors to sell DSL and other services to customers. This is similar to allowing customers to choose long-distance services, or attach their own answering machines and modems to the phone connections - things the Bells were opposed to, but consumers now take for granted.
Now we learn that WorldCom managed to temporarily "survive" the anti-competitive actions of the Bells was by committing fraud - but could ultimately be bought by one of the Bells.
The Bells are asking Congress to kill off the remaining competition by repealing the 1996 act while Chairman Powell is formulating regulations to accomplish the same at the FCC.
President Bush needs to put Michael Powell out to pasture before he does more harm.
Yes it's dark, but much of that is older CWDM (Coarse Wave Division Multiplexing) which only handles one frequency (color) of light, whereas most of the new cable which is lit is DWDM (Dense Wave) which multiplexes dozens to hundreds of frequencies simultaneously.
Yes VC's started some of it (Level3), but they and the big networks grew on revenues and much on corporate bonds (where the interest rates come in). Also, many mergers were stock mergers, and as the market fell, bigger companies had less "buying power", seldom offset by cheaper acquisitions.
The existing capacity is not being used because the Bells refuse to upgrade their "last mile" from the archaic voice-grade connection to a modern standard until the the competition is driven out of business. Most of the companies that built these new networks, like GlobalCrossing and WorldCom, are on their last leg because the Bells have failed to deploy the last mile.
Yes the Bells haven't finished the last mile, mostly because of the incredible cost of digging up streets an laying fiber, or additional copper for DSL to the curb or house. This is what spawned a plethora of fiber-less line of sight laser technologies for corporate metropolitan use, but new routers and switches are needed as well to complete the access loops and last mile. All of this capital outlay is very expensive and fraught with uncertainty, which wasn't an issue when the internet was exploding in 97-00, but again interest rates caught up and killed it.
I would agree however, that the Bells used every opportunity to hide behind these problems and stifle competition.
And I further agree, putting a bell in charge of WorldCom will not engender the kind of competition to re-kindle the telecom industry.
My sources at Southwestern Bell claim that most of their COs already have DSLAMs installed and they could start selling DSL service today if they wanted to - but they want Congress to outlaw DSL compeition first.
Remote terminals to extend the DSL service range are not as widely installed yet, but the Bells will recover their RT investment fairly quickly when the service is sold.
Aren't most homes for instance beyond the distance limitation for DSL? (which I think is like 3200-5000 ft?)
Hmmm.... WCOME 0.14 -0.02 ....you ummm short or long?
What's the solution? I wish I had one in mind.
It depends on several factors.
DSLreports.com has a web page that shows the distances of several providers -
http://www.dslreports.com/distance
They also have a page that will show the address and maps of central office locations -
I'm wondering if the RBOC is being deliberatly difficult.
Here is one more tool to help determine that. This estimates the wireline distance from the C.O. to your address -
Pacific Bell built the last mile. Right to the side of my home in Mira Mesa. They tore up the streets, added pedestals all over the neighborhood, installed environmental cabinets with electric meters to terminate the fiber. About 3 weeks into the deployment of the new infrastructure (customers actually had live service), SBC acquired PacBell. Within a couple weeks, the new cabinets were stripped. The new fiber in the ground was abandoned. All that was left was scarred streets, sidewalks and yards. SBC totally killed it. The last 1/10th of a mile to my old house was provisioned on a coax cable. The fiber stopped at the other cabinet. What a total waste.
Well that reinforces what HAL9000 was saying.
At least PacBell did a better than average job of deploying DSL for a while - which is why DSL has a 60% marketshare compared to cable in California.
SBC complains that in most of their territory, cable has the larger marketshare. Perhaps they would improve their market position if they would quit whining and start deploying and selling the product.
Many of my co-workers tried to order DSL service directly from PacBell. Many waited months before giving up and going with a cable modem. PacBell simply didn't have the service provisioning capability that Covad demonstrated.
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