The 1996 Telecom Act is still a good thing.

When the Telecommunications Act of 1996 was signed, it was extolled by both media and industry pundits, each hailing it as a piece of landmark legislation that promised to change the face of telecommunications forever.

But, as we've passed the Act's third anniversary, the media are asking: "Where's the beef?" Especially in the local market, the availability of choice and enhanced services appears stymied as incumbent carriers joust in courtrooms to protect their turf while plotting invasions of others'. Some wags perniciously predict that when the dust settles (eventually), we'll have one big phone company again. But there is one point upon which we should all agree: the Act has shaken the money tree.

In a February '98 anniversary report, industry publication tele.com chalked up one result of the Act as substantially increased investment in networks by providers. The article noted that incumbent telcos, long-distance carriers, and new entrants reported capital expenditures of some $42.6 billion in '96. The article reported that new local competitors alone spent at least $12 billion in capital projects in '97. That figure was a third higher than '96 and easily the largest annual amount that newcomers have invested in their relatively short history.

In March 1998, I stated before the Senate Antitrust, Monopolies, and Business Rights Subcommittee that the money competitive carriers have raised since the Act is seven times as much money as they raised in twice as much time before the Act. Moreover, new local competitors recorded $2.7 billion in revenues last year from a standing start a few years ago. This was generated from some 1.4 million new access lines in place by year-end '97.

By these calculations, the Telecom Act can be deemed a success. It has enabled newly established capital-intensive companies to access the financial resources necessary to build facilities-based networks rather than rely on reselling existing carriers' capacities. Over the next three to five years, users will have even more choice in terms of providers of local and long-distance services.

For the most part, new market entrants use fiber optic transmission technology that is costly to deploy in the cities and regions where business revenue resides. These carriers rely on fiber to provide customers with high-speed access, with the biggest investments being made at the local exchange level. Incumbent local exchange carriers (ILECs) slowly replace antiquated copper wires with fiber as they struggle to protect their turf from competitive local exchange carriers (CLECs) who are starting out with the latest technology, unencumbered with legacy infrastructure.

THE PROBLEM WITH WHAT IS

But because fiber is costly to deploy in a metropolitan environment, both ILECs and CLECs are focusing the bulk of their attention on big accounts residing in central business districts. Ignored to the larger extent are businesses beyond the reach of fiber. In a sense, these "access disadvantaged" lack high-speed "on ramps" to the national information infrastructure and the resources of the Net. By most estimates, there are some 750,000 commercial office buildings in the U.S. But less than 10,000 are served by fiber. Each of those - indeed, each computer on each desk in those buildings - can be viewed as isolated islands of opportunity for new carriers.

Even where choice is available, differentiation between what was and what is may be hard to perceive. Few of the new carriers are delivering much more than what was. Call it connectivity, call it convergence, call it lack of counseling or advice - but call much of it missing. Service providers that offer local and long-distance services, information content, and high-speed access to other information resources over or through their own facilities deserve the awards for bringing to fruition much of the promise of the Act.

In the midst of court battles, mergers, headline-grabbing takeovers, and buy-outs, a quieter revolution is underway within the industry. Today, a handful of firms is exploiting a technology called fixed, wireless broadband as an alternative to optical fiber; this shouldn't be confused with the "wireless" of mobile phones, paging systems, mobile-enabled laptops, and certain types of plain old telephone service (POTS). These services are cellular-based to support, primarily, the mobile user.

Digital fixed wireless broadband service is, in contrast, a fixed line-of-sight technology designed for high-speed, high-capacity, and completely reliable broadband communications. In this sense, it is like fiber, but instead of connecting points through underground conduit, the service takes to the air. It is transmitted between dinner-plate-size antennas placed on building rooftops. Developed earlier by the U.S. government as a means to control the "smart bombs," such as those used in the Gulf War, this technology has proven itself in Europe, and now in the U.S., delivering service with a reliability of 99.99 percent. Without the Telecommunications Act of 1996, the financial resources to deploy this new technology as a true alternative would not be available.

THE PROMISE OF WHAT COULD BE

As it is being deployed in the U.S., the technology is bringing together for the first time information, broadband communications, and computers in a meaningful way. This is because service providers using the technology are recasting the role of a phone company from what it was to what it should be: an integrated provider of voice, data, video, information resources, and advice on how to use them. True, "convergence" is a tired buzzword in our industry; it's not happened to date because would-be purveyors have been unable to meld their incompatible cultures.

In the meantime, broadband wireless carriers are stepping into the breach and delivering on the promise of the Act. Information resources? We can now access more than 1,100 databases or 30,000 periodicals on an a la carte basis without hefty subscription payments. Education? Broadband wireless data brings the Net along with special educational programming into the classroom or the boardroom. Frame relay, ATM, long-distance services? Right this way. Speed of deployment? As soon as a broadband wireless hub site is up, every PC in every building within a 1.5 to 2 mile radius of that hub can enjoy resources heretofore available only to the chosen few on the tiber ring. With approximately 90 hubs operating in more than 30 major markets, these services have become generally available in less than two years.

Fixed digital wireless broadband networks have been proven as a telecommunications medium. Where they are available, customers praise their speed, reliability, and value-added services. But in the largest sense, providers of the technology are CLECs and face many of the same challenges of competitors using conventional technology. Challenges include, but are not limited to, licensing, interconnect agreements with the ILECs and associated reciprocal compensation, number portability, and, in some cases, acquiring building access rights. Of these challenges, dealing with the ILECs remains the crucial barrier to speedy deployment of broadband digital wireless or other alternative networks in the local exchange area. Indeed, the lack of true competition in the local exchange area has caused the most criticism of the Act (see sidebar).

STEAMING TOWARD THE FUTURE

Without suggesting that all is well, we believe the interconnect issue will disappear over time. A vibrant, healthy, competitive local telecom infrastructure is a good selling point for a city or region intent on attracting new business. We expect ILECs will increasingly "see the light" and work to make the best of a hopeless case; they will give up the dream to return to the good old days.

Like an aircraft carrier, competitive services require time to move from a full stop to full steam ahead. Right now, the CLEC industry has a market penetration of about 3 percent of revenue and 1 percent of access lines in the $106 billion local exchange market. But each license granted, each interconnect agreement signed, and each building served represents a forward nudge to the engines. The Telecommunications Act of 1996 is alive and well.

UNCOVERING THE TRUTH

So what's wrong with the Telecommunications Act of 1996? Senator McCain suggests that the section of the Act designed to ensure competition in the local loop has created a quagmire of arbitration and litigation between carriers. According to the Association of Local Telecommunications Services, the problem is the time and effort it takes to create alternatives to local networks that possess the capacity and capabilities required by information-intensive customers.

There's no question that a major impediment to progress is the lack of cooperation by the ILECs in allowing expeditious and appropriately priced interconnections to their networks and systems. While proudly pointing to the large number of agreements that have been signed, ILECs studiously avoid discussion on the number that have been implemented. And that number drops when the criteria includes CLECs that are truly facilities-based rather than resellers of the incumbent's capacity.