Saturday, June 2, 2001

Internet Freedom Act Dead?

The announcement by Vermont Senator James M. Jeffords to leave the Republican party and become an Independent will have a dramatic effect on the Internet Freedom and Broadband Deployment act that moved to the Senate for a vote, according to Dataquest Inc., a unit of Gartner, Inc. One week ago, bill H.R. 1542 was expected to pass through the Senate, but Gartner Dataquest analysts said that is unlikely to happen now that the Republican party is no longer the majority party in the Senate.

The bill calls for deregulating competitive data services, including Internet access, and codifying the deregulation of the Internet. It also prevents the regional Bell operating companies (RBOCs) from offering voice-over-the Internet-type services until they receive approval from the FCC to offer in-region long distance services.

The chairmanship of the committee with the greatest impact on the telecom industry - the Senate Commerce, Science and Transportation Committee - will move from Republican Senator John McCain to Democrat Ernest Hollings.

"Hollings has long been an adversary of the RBOCs, and his return to the top spot on the Commerce Committee will prove to be an unfortunate development for backers of the Internet Freedom and Broadband Deployment Act, H.R. 152," said David Rendall, group vice president for Gartner Consulting. "The bill will fail as a result of changes in the Senate's agenda."

The Telecommunications Act of 1996 has not effectively opened telecom markets to competition, and many Democrats think that more legislation is the answer. Gartner Dataquest analysts said additional government regulation is not the answer.

"Regardless of intentions, additional telecom laws will not promote local competition," said Ron Cowles, principal analyst for Gartner Dataquest's worldwide Telecommunications and Networking group. "But properly designed incentives and a new regulatory paradigm will. The government should immediately open an 'information inquiry' to examine telecom policies and processes necessary to advance the United States into a future world we call the 'infocosm.' Such an inquiry should seek to attain universal information service to benefit all."

Gartner Dataquest analysts said government should remove all the encumbrances that stymie competitive entry and infrastructure investments. It should also reduce all competitive barriers to entry, including rate subsidies, onerous right-of-way processes and other encumbrances. The government should also provide for interconnection negotiations among the parties without interference.

"The government should enact incentive programs designed to attract competitors to the local exchange marketplace and reward carriers for building advanced networks," Cowles said. "The government should also provide investment incentives for the deployment of advanced networks to serve both the unserved and underserved areas. Finally, the government needs to understand that broadband will need to be universally available, not a niche application."