13 October 2005

Naked DSL and telcom mergers

I want to draw your attention to this article. As you should already know, the FCC is now considering whether to approve the mergers between AT&T/SBC and MCI/Verizon. This points out that some are arguing for "naked DSL" -- that is, DSL without the voice service -- as a way to diminish some of the potential anticompetitive aspects of these mergers. How would this help? Why do you think the firms who are advocating this are doing so? On another note, why is the FCC even involved in this? Antitrust analysis in the US is normally done in the Department of Justice (headed by the US Attorney General).


James Twigger said...

I would agree that DSL should be offered as both a bundled product and a standalone product (option without voice).

I can say that if this was done already, I would assuredly cancel my telephone service and only keep the DSL service...so that I could instead signup with Vonage or any one of the VoIP providers.

By requiring that a naked DSL service be offered, this would most definitely increase competition between the standard voice service providers and the newer VoIP providers. Typically, VoIP costs are cheaper that those of a typical phone service provider (most notably long distance calls). The additional $23 a month that I have to pay to have DSL (for phone service from Verizon) is currently one of my barriers to solely using VoIP.

Increased competition with VoIP providers would drive down prices of both services and also encourage further innovations and competition based on service quality.

Martin Weiss said...

But why can't you use a cable modem instead of DSL? Is the cost of your phone line plus DSL greater than or less than the cost of CATV with cable modem service? Should CATV operators be required to offer "naked cable modem" service as well?

Phil Cox said...

Since the propsed mergers constitute vertical integration, the combined companies would have conflicted roles of both common carriers and service providers, much like the original Bell System. The other regional incumbent telecoms, as well as other providers of VoIP, want to be assured of a competitive market. Thus, it seems reasonable that DSL be unbundled from standard telephone service. This raises the question of "cream skimming", because the other VoIP providers are taking advantage of the existing infrastructure.

Although the mergers would appear to be anticompetitive, the other huge player in the growing telecom market is the cable industry, which is basically immune to competition. The cable companies can offer telephone service over their system without opening it to competitors. Recent supreme court rulings upheld the definition of the cable companies as data services, rather than as common carriers. The FCC seems to be schizophrenic in its decisions and pronouncements: on the one hand upholding that definition of the cable industry, and so allowing them to have a closed network, and on the other hand insisting on net neutrality from all providers. But, that policy has no force of law. Cable and telephone companies have promised to be neutral, but I read an article recently in a Pittsburgh newspaper about a company that offers blocking software that can identify various kinds of network traffic.

Carlos said...

I agree that DSL be offered as a standalone product and not tied up with a voice service requirement when buying DSL service.
Use of VoIP services would be stimulated this way and prevent the big merged companies to control both voice and data markets.
Also it is worth noticing that if a lot of users move to VoIP, then most of the voice (circuit) switching infrastructure of the merged companies would be unused. Although this presents problems by itself, it's also an opportunity for these and other companies to maybe move to a packet-switching infrastructure for handling all services in their networks.

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