Ion: The Bells and Broadband -- the promise never kept

The Bells and Broadband -- the promise never kept

Fred Goldstein, February 2003

...Old-fashioned rate of return regulation was replaced with price caps in state after state, often in exchange for promises of network upgrades that never took place.

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...The telcos in 1985 thus figured that the best defense was a good offense. If they could offer video, then they'd be able to fight the cablecos on their own turf....

TeleTruth, a New York-based consumer organization, recently released a report that describes how Verizon-Pennsylvania failed to live up to its obligations under a 1994 deregulation plan. The ILEC, then known as the Bell of Pennsylvania subsidiary of Bell Atlantic, was granted rate changes, which according to Teletruth were worth since then "$785 per household", in exchange for a promised upgrade of the network to what we now call "fiber to the home", or FTTH. Bell apologists have suggested that ADSL is an adequate form of "broadband", but to quote TeleTruth's recent complaint to the Pennsylvania PUC,

What is being promised is the replacement of the older copper wiring with a new, fiber-optic service that has speeds of 45 mbs in both directions. This is 50-100 times the current ADSL service, which goes over the 100-year-old copper wiring and is a mostly one-way product. The agreement also requires Verizon-PA to wire both rural as well as urban areas---- 20% by 1998, 50% by 2004. And this service is fiber-optics directly into the home and office, not ending at the street. Today, there are no homes with this wiring or that delivers the speed.

Lest one assume that this problem is specific to one state, I'll point out that the RBOCs across the country were making similar promises in exchange for similar deals. Old-fashioned rate of return regulation was replaced with price caps in state after state, often in exchange for promises of network upgrades that never took place.

A promise to pull fiber to the home made a decade ago? Isn't that what the ILECs are now saying they'll only provide if they don't have to share them with CLECs and independent ISPs? We've heard the story before! FTTH is the promise never kept.

Let's set the wayback machine to 1985. That was the year I joined an ATIS ANSI-accredited subcommittee that was writing standards for digital telecom networks. I represented a large computer company, putting me in a minority there (surrounded by Bellheads, some very smart and some, well, bellheads). There was "narrowband ISDN" (what is normally called ISDN), which was a couple of years away from trials. There was frame relay, which was just being thought up as a replacement for X.25. And there was a new CCITT (now called ITU-T) project that we were the US input to, called "Broadband ISDN". In CCITT terms, Broadband began at 50 Mbps; 2-50 Mbps was merely "wideband".

B-ISDN was starting to be developed by telcos (remember PTTs?) worldwide as their response to the potential threat of cable. I first saw a cable modem being marketed in 1982. (It didn't catch on with the cablecos at the time, but they could have bought the product.) The telcos in 1985 thus figured that the best defense was a good offense. If they could offer video, then they'd be able to fight the cablecos on their own turf. Now in 1985, cable TV was old technology, all analog, mostly one-way 300 MHz coax with lots of repeaters. To get over 100 channels on the brand-spankin'-new Cablevision Boston system, they pulled dual coax. The telcos figured they could jump-start this with fiber optics.

So the B-ISDN project focused on what were outrageously long time frames, even by telco standards (for whom it takes three hours to watch "60 minutes"). We figured we'd see narrowband ISDN widespread around 1990, and B-ISDN roll out in volume somewhere in the late 1990s.

It was around the beginning of 1986 when CCITT really adopted "ATM" as the core technology of B-ISDN; before that, there was interest in using TDM over OC-3. B-ISDN with ATM was assumed in 1986-1990 to begin at OC-3 (155.52 Mbps); that was expected to be wide enough for one HDTV channel plus whatever else a house might need. (Today's 20 Mbps HDTV compression was not anticipated in the days when an 80286 was a "turbo" CPU.) The old copper telco plant was depreciating, so replacing it with FTTH over 20 years or so seemed, well, both sensible and inevitable. We continued using these assumptions well into the 1990s.

That, my friends, was the background of Bell's broadband promise. DSL was not on the table. In 1993, the Internet wasn't even open to the public yet; the high-speed applications were expected to include telecommuting, LAN interconnection, videoconferencing, video-on-demand, and as-yet-uninvented services. The Bells figured that they were going to do this FTTH thing to keep ahead of CATV. And they wanted out of the old rate-of-return regulation, because they foresaw higher productivity (or perhaps union busting, knowing Bell Atlantic) leading to lower costs. Rate caps would let them keep their higher profits.

Of course when it came time to actually look hard at FTTH, the numbers didn't add up. The Bells saw DSL as a mid-life kicker for the old copper plant. And they didn't see enough demand to pay for FTTH. They still don't -- the FCC's bargain in the UNE review is no bargain! But TeleTruth's argument is truthful; the Bells were talking about FTTH broadband, and conveniently forgot it after winning rate caps. In this year's proceedings, they talked about FTTH broadband, and have won significant relief against CLEC access to their local loops. If you really expect them to live up to their promises this time, I've got a nice bridge for you too.