In The Deal of the Century, the 1987 classic account by Steve Coll of the breakup of the Bell System, one of the Bell local operating company presidents (pre-breakup) is furious about MCI’s attempts to build microwave private lines for companies. Here he is, arguing to the AT&T chairman that MCI has to be stopped:
There are large amounts of revenues that are vulnerable, which we can preserve if we choke off now. I think you have to hit the nails on the head.
The AT&T Chairman, John deButts, eventually follows his advice – and when MCI comes to AT&T asking for interconnection agreements in major cities so that it can sell private line services, AT&T delays, avoids, and then directly challenges MCI. Coll says deButts “call[ed] for nothing less than a public anointment of Ma Bell’s right to exercise its monopoly in the national interest” in this speech:
The time has come, then, for a moratorium on further experiments in economics, a moratorium sufficient to permit a systematic evaluation not merely of whether competition might be feasible in this or that sector of telecommunications but of the more basic question of the long-term impact on the public.
In other words, AT&T’s deButts was calling for a moratorium on MCI’s efforts to interconnect with AT&T.
The news today is from Canada, where Bell Canada has called for a moratorium on the efforts of independent ISPs to compete across its lines. “Canadian Regulators Deny Relief For Bell Canada Traffic Shaping.”
The argument from Bell Canada is that its throttling of PDP traffic (before it even reaches independent ISP networks) is not creating a disadvantage to competitors – and thus is not violative of its obligation to sell wholesale access to its network. Although the CRTC found that the ISPs had raised serious questions about tariff compliance, the regulator wasn’t convinced that the harm caused by this practice was irreparable, and so didn’t want to grant interim relief prohibiting the practice.
This isn’t over – the argument against Bell Canada’s throttling practice is that it amounts to “an anticompetitive move aimed at ensuring that nobody could offer higher quality service than Bell Canada’s Sympatico unit,” and the CRTC will hear that question. This is just an interim order.
In the meantime, however, Bell Canada is successfully choking off competition and hitting the nails on the head. It’s required by law to open up its DSL network to competitors (just as the old AT&T was required to interconnect), but it is unwilling to do so in ways that might leave revenue on the table.
[update:: privacy complaint from the Univ. of Ottowa clinic - all that deep packet inspection is troubling]
MCI was undercutting AT&T’s long distance rates, intentionally set high to allow low local rates – after the ’84 breakup, long distance rates plummeted as local rates increased by assigning all “loop cost” to local POTS and none to PANS (Pretty Amazing New Stuff – call waiting, etc) – the ’96 Tele Act was about the Bells getting back into long distance with a bait-and-switch campaign that exploited CLEC resellers to the tune of $65B and then dumped them as two versions of the old AT&T were reconstituted under deregulation
from a “defense of loss revenue” perspective, today’s major broadband players are throwing up entry barriers beyond the simple ones applied to MCI and CLECs, because the competition arises from within the diversified content as well as from the horizontal perspective of ordinary resale based on interconnecting facilities (i.e. message from ex-CEO of AT&T Whitacre to Google et al – they’re using our pipes for “free”)
when Bell Canada throttles P2P on which its small ISPs depend through Bell’s resold facilities – to distinguish themselves from Bell in the first place with “net neutral” policies – it’s clear evidence that Bell regards them more as a competitive threat to overall net revenue via potential losses rather than that gained through “complementary” non-threatening revenue – a small ISP could never “cross the line” to undersell what it is resold at a loss, so it’s the diversified content and neutral TOS that is a problem to Bell
the smokescreen designed to obsure these anti-competitive strategies by the major players lies in a myriad of bogus threats associated with managing congestion via content claimed inextricably intertwined with bandwidth assignment as well as the protection of content property rights and network security, all on”non-neutral” grounds posed falsely as necessary to prevent “suppression” of investment and innovation of broadband service itself
Barry – yes – my article The Radio and the Internet makes these points – http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1088204