Aug 8, 2001 : Bell Companies Blamed for Tech Crash

📅 August 8, 2001 - In a controversial analysis released last week, New Networks Institute (newnetworks.com), a consumer advocacy research group, lays out a series of related events and actions on the part of the Bell Companies that have contributed in a major way to the tech sector crash and will hamper the sector's recovery and the roll-out of broadband services.

The report, entitled "The Bells and the Current Recession: The Fiber OpticFiasco and America's Copper Dirt Road," claims that the Bell companies'failure to roll out their broadband services as promised, along withanti-competitive behavior in the face of regulations obligating them to openup their monopolies, has scared away investment and diminished the growthprospects in the tech sector. NNI says these actions have contributed tothe sector's current problems and decline.
According to the report the Bell companies have successfully defended theiraging copper wire phone networks and have marginalised many consumers andcompanies hoping to build a new product and service line on broadbandcapabilities.
"The Bell Companies are doing exactly what one would expect them to do,"said Bruce Kushnick, executive director of NNI in a statement. "They aredefending their legacy investments. But in locking out competition andinnovation so effectively, they are hampering the recovery of the techsector and the economy at large. Congress and the Administration should beaiming to act immediately to address and fix the bell caused problems, orthe economy will continue to suffer."
According to the report, Bell had promised that over half of Americanhouseholds and the majority of schools, libraries, hospitals and governmentagencies were supposed to have been rewired with fiber-optics to the home.The Bells convinced state and federal regulators that if they changed lawsto give them more money, they would use these funds to replace the agingcopper network. However, none of these services exist today, even thoughAmerica spent over $50 billion dollar in extra charges on phone bills.
The report claims that, had the Bell companies actually rolled out theirpromised networks, including fiber-optic wiring to homes and institutions,the tech, content, and telecom sectors, would have flourished. This newgeneration of applications would have also spawned the need forhigher-performing computers, new software applications, new computer chipsto drive these machines and software, and other add-on devices like digitalcameras and CD-RWs.
The report also criticizes the Bells for harming the current DSL andbroadband markets. In NNI surveys of ISPs using CLECs, about 50% of allorders have problems. This equates to a slow rollout of DSL because thecustomer, IP and the CLEC are all beholden to the Bell for service.
"Unfortunately, the regulators have been asleep at the wheel and there'slots of talk, but we do not expect the FCC or the state public servicecommissions to enforce the current laws. Thus, the capital markets will notwant to invest in these companies," Kushnick said.
The report predicts that the scenario will worsen if the Tauzin-Dingell billgoes through, a legislative proposal that promises to let incumbent localexchange carriers sell long-distance data services, which the NNI calls"nothing more than a Bell-sponsored bill to give Bell more money fornetworks they already should have put up."
The report has been criticized by some industry analysts and spokespersons,who say the Bell companies have put much work and money into the broadbandrollout. "People go after them because they're slow, methodical, andthey're a monopoly," Maribel Dolinov, an analyst at Forrester Research, toldInfoworld. "But because of deregulation, there was no incentive for them toever create new network services. It doesn't make any sense to spendbillions of dollars and then have to resell it for less than what they'dever get from selling it to a customer."