Why are the Telcos the industry whipping boys?
I have to admit, I am definitely guilty of our favorite pastime of telco bashing. Having worked extensively with BellSouth as part of an NSP (basically a BellSouth reseller, when all is said and done), I have often launched into many a tirade about the evils of the ILECs and their negative influence on the industry.
Still, I am often wondering these days whether the industry hatred of BellSouth, AT&T, Verizon, etc.. is perhaps a little misguided. Don’t get me wrong–they are no angels. But, having had some recent exposure to the cable industry, I’m not sure that most of the independent service providers would be better if the ILECs take the much desired tumble, leaving only the cable companies as potential partners for physical infrastructure.
Most of the industry dislike is voiced by businesses whose livelihood is tied to an ILEC: CLECs, NSPs, VoIP providers, etc. I think, unfortunately, the familiarity breeds the contempt; the most aggressive telco-haters are generally the companies who need infrastructure partners since, in most cases, they lack the means to provide end to end infrastructure to even one of their customers, let alone thousands. So, they lease lines or interconnect with the ILECs, play marketing, branding, and semantic games, and, when all is said and done, simply game the system to provide the same basic services rebundled at a better value using the ILEC infrastructure. Down with AT&T? Down with Verizon? Who is ready to step up and take their place in the market? Who attempts to build real infrastructure? The only real nod here goes to the wireless guys and, when all is said and done, the technology is limited in its capacity.
We speak of deregulation increasing competition and, in some sense, it has. The market is much more open and vibrant than it was in ‘96 and ‘84. But, when all is said and done, I wonder if deregulation has failed in its basic objectives: there are still only a handful of companies that actually make the long-term investment to lay real infrastructure. The CLECs of yesteryear made billions of dollars off a favorable regulatory environment and billing loopholes; relying on a great UNE-P rates instead of actually getting their hands dirty. With a few notable exceptions, I don’t think the amount of CLEC infrastructure could make a dent in a third world nation, let alone in the US.
No matter how many different companies compete on selling services over that infrastructure, the only thing that will increase competition in that space is more companies actually building real infrastructure. I think, perhaps, the FCC is not being as foolish as we’d like to think–they are generally being supportive of the people who can actually provide real competition and broadband penetration (ie telcos, cable companies, and wireless) and making the rest of the industry operate as the resellers they have become. After all, a 1000 NSPs won’t provide increase broadband penetration in the least.
I’m not going to stop bashing the telcos: after all, they are fun to hate. Still, if the ILECs tumble, who really wins except the cable companies? Judging by how few people make a living partnering with the cable companies, I’m not sure that is the desired outcome.
Well, at least some of the resentment has to do with the fact that they’re especially, egregiously corrupt. No, they’re not really any different than most other special-interest industries in this regard (and they don’t have a candle to the defense sector), but still, hard to ignore Exhibit A, Exhibit B, Exhibit C, Exhibit D, etc.
That, combined with the very valid reasons you gave, probably gives a lot of expression to rage.
The other thing is, most of the hating that goes in small business goes on within relatively small trade organisations, associations, conventions, meetings, etc., so fashion trends have a lot of potential to amplify and enjoy widespread adoption, most especially if business is not going so well and someone proposes what appears to be a semiplausible object of blame.
I also think that you are somewhat guilty, if only as a matter of rhetorical accident, of painting the CLECs to be a little more useless than they really are as it relates to last-mile build-out.
Running fibre is pretty capital-intensive, everybody knows that. The folks who leverage the most competitive advantage and returns to scale in doing it are either large ILECs operating as CLECs in other areas, or other suppliers that routinely dig and bury things. I would say that the provider of the physical media is very commonly in another stratum of the supply chain from the carrier, and this is true of ILECs too. Hardly does BellSouth own all the fibre it runs its network over, for example.
CLECs are very enthusiastic about and interested in last-mile loop options that bypass the ILEC and the UNE edifice. In substantial metropolitan statistical areas, it is very common for CLECs to lease fibre laid by carrier-neutral electric, water, and gas utilities. These folks typically know absolutely nothing about telecom, but they have the backhoes and do a lot of digging anyway, so they’re more than happy to make money essentially doing something they already do on a large scale. CLECs much prefer to buy up this kind of fibre over leasing Bell system network if possible.
Does this really enhance the overall penetration and footprint of the build-out that deregulation was supposed to be encouraging? Well, no, it’s just adding density to the mesh in urban areas for the most part. But I don’t know that this is something one should blame CLECs for per se, for precisely the reason that competitive carriers — even larger ones — seldom do that. They provide the transport equipment on both ends, they maintain the fibre, they troubleshoot it on the physical layer, and they put it to use, but they didn’t actually dig the trench. I don’t think Level 3 even a small percentage of the fibre that makes up its network, one of the larger IP transit overlays in the world.
PS.
Some folks have interesting ways of approaching the problem of explaining that in the end, they’re just an NSP / BBG reseller. Take Speedfactory’s FAQ:
“Q: Do I have to have BellSouth as my local phone provider?”
“A: No. While Speed Factory has partnered with BellSouth (they offer the largest network in the Southeast) to offer you DSL, Speed Factory can deliver DSL on other telephone providers designated as authorize providers. This does not affect long distance.”
Very clever.
I thoroughly understand the animosity towards Bellsouth after having worked with you for only a few short months. Of the proud few that I know who work side-by-side with various other ILECs, the feeling is mutual. From what I have read about the goings on of FCC in regards to forcing competition, it seems to be hurting the consumers more than it is helping the CLECs/NSPs/etc. Though I do enjoy bashing the telcos and cable companies as much as the next guy, overall I don’t see things getting much btter than they are right now.
Nice blog by the way. I didn’t peg you for writer of this caliber.