Technology

Telcos: Traffic Will Flow

3/20/2005 7:00 PM Eastern

Washington— The leaders of Verizon Communications Inc. and SBC Communications Inc. last Tuesday told a Senate committee that they have no intention of blocking competing voice-over-Internet protocol service providers.

“We are not going to block anybody’s traffic,” SBC chairman and CEO Edward Whitacre told the Senate Judiciary Committee.

Ivan Seidenberg, chairman and CEO of Verizon, said the company is not blocking and has no incentive to do so, because his company’s VoIP traffic must flow over networks owned by competitors.

'WE BUY ACCESS’

“Just to give you some comfort, we also buy access to [AT&T Corp.’s] and [SBC’s] network to put our Internet traffic over it. So we would have no reason to block anybody else’s traffic when we are putting our own on other people’s networks,” Seidenberg said told the same panel.

The hearing examined SBC’s proposed $16 billion merger with AT&T and Verizon’s $7 billion deal to acquire MCI Inc. The House Energy and Commerce Committee held a similar hearing two weeks ago.

Congressional committees don’t have power to approve mergers, but lawmakers are entitled to raise objections with the Federal Communications Commission and the Justice Department.

Three weeks ago, the FCC effectively fined a small phone company — Madison River Communications LLC — $15,000 for blocking competing VoIP traffic.

Vonage Holdings Corp. — the No. 1 VoIP provider, with more than 500,000 subscribers — had publicly complained about such activity by a phone company, but would not name the telco.

Comcast Corp. chief operating officer Steve Burke recently said the MSO does not and will not block competing VoIP providers from serving Comcast cable-modem customers.

“I think that would be a terrible business decision,” Burke said.

According to one published report, Vonage is accusing an unnamed cable company of blocking its service. But a Vonage spokeswoman refused to confirm any details in the story.

Asked by Sen. Herb Kohl (D-Wis.) whether their companies would accept a merger condition barring VoIP blocking, Seidenberg and Whitacre voiced opposition.

“I don’t like conditions. I guess at this point in the process, we need to see the whole picture,” Seidenberg said. “As a matter of practice, we are not doing anything that would suggest that we’re blocking anybody’s traffic.”

BOUCHER PROVISION

In the House, Rep. Rick Boucher (D-Va.) said last Wednesday that if Congress decided to update telecommunications laws, he favored a provision that would prevent network owners from discriminating against competing VoIP services.

“This rule would be very simple. It would say a platform owner may not disable access to any Web site on the Web and particularly could not do that in order to engage in anti-competitive conduct,” Boucher said.

FCC chairman Michael Powell, who was expected to leave office late last week, endorsed network-neutrality principles, but did not believe that rules addressing the issue were appropriate.

Boucher said that based on FCC inaction and reports that VoIP traffic is being blocked, he believed Congress should enshrine network neutrality into law.

“We have an opportunity to insert this very common-sense principle of network operation into the statute. I am inclined to do that,” Boucher said.

Testifying before a House subcommittee, Cablevision Systems Corp. chief operating officer Thomas Rutledge said last Wednesday that his company benefits from robust Web-based commerce because it leads to greater demand for his company’s high-speed Internet access service.

“I don’t think there is any example of any cable operator blocking sites on broadband networks,” Rutledge said. “We actually like the fact that sites are getting richer … I don’t think, from our point of view, we see a problem, but our networks are, in essence, open.”

'NAKED’ DSL

On a related topic, Kohl also asked whether SBC and Verizon would provide “naked” digital subscriber line service, meaning that they would not require high-speed data subscribers to purchase local phone service in a bundle.

“In the future, we are in the process of working through the mechanics of offering a DSL line without a phone number,” Seidenberg said.

Whitacre said SBC would provide naked DSL, but only if it were profitable.

“Would SBC do it? Of course SBC would do it. But SBC is not going to do it under the price of what it costs us to provide it,” he added.

Again, both Seidenberg and Whitacre said they opposed a merger condition requiring the sale of naked DSL.

September