CUSTOMERS’ CORNER LEVINE & BLASZAK

How The BOCs Work Washington And Why It Matters

nterprise user IT/telecom executives under- calls and visits from virtually all the carriers—of stand networks and technology, but they having, in fact, a professional at each carrier ded- E often don’t appreciate the influence of gov- icated to communicating with her about issues of ernment oversight on the availability and prices of interest to her. The vendors were always anxious services. As a consequence, they often can’t dis- to provide information, make experts available tinguish a vendor tell- and, of course, arrange ing the truth from a ven- dazzling technology dor “blowing smoke.” tours. The level of In subsequent attention she received columns we’ll take a was by no means look at the major tele- unique. com issues actually Even though the pending in Washington. FCC is an “indepen- But we start with a tuto- dent” regulatory agen- rial on how Washington cy, only the sublimely makes telecom policy, naïve believe that the and how the BOCs (the Commission is unaf- Bell Operating Compa- fected by Congression- nies, once seven in al communications and number but now preferences. Congress reduced to AT&T, Ver- controls the FCC’s izon, and Qwest) Lobbying has always been one of the budget, has oversight ”help” the process. The telcos’ core competencies. They’re jurisdiction over the focus is on the federal FCC and can pass leg- government simply be- looking to build on past succ`esses islation defining its cause enterprise users mission and revisiting typically spend a lot its decisions. On occa- more on interstate and sion the FCC will international telecom- “buck” Congress, but munications (both federally regulated) than on there has never been a time when the Commission intrastate telecommunications. was unmindful of Congressional preferences. For that reason, among others, the carriers have Influencing Decisions always devoted substantial resources to establish- For most of the 20th Century, the Federal Com- ing and nourishing relationships with members of munications Commission (the FCC) pervasively the relevant Congressional committees. They regulated telecommunications carriers—control- make substantial political contributions, support ling market entry and exit and regulating the rates candidates and visit often to “educate” and “tell and terms pursuant to which the carriers offered their story.” The carriers understand the impor- their services. Regulation was necessary because tance of the relationships that develop as the result the telecom market simply wasn’t competitive— of frequent face-to-face meetings. the Bell System (composed of AT&T and 20+ Despite the influence of AT&T and its progeny, local exchange carriers, most of which were whol- during the last third of the 20th Century, the FCC, ly owned by AT&T) accounted for 80 percent of the U.S. Department of Justice, and the federal the nation’s lines, customers and revenue. courts made decisions that facilitated competition Regulated carriers fully appreciated the effect in the telecommunications equipment and long of regulation on their profitability, and they cov- distance markets. In important cases, such as ered the FCC like a blanket. Then and now, they Hush-A-Phone and Execunet, appellate courts communicated almost daily with virtually every (which were not as deferential to administrative level of the Commission, “educating” and “telling agency decisions as they are today) pushed the their story.” One of our partners, who had been a FCC further than the agency chose to go on its senior staff person at the FCC, tells of daily phone own. The Justice Department, during the Reagan

66 BUSINESS COMMUNICATIONS REVIEW / AUG 2007 Administration, and the U.S. District Court for the ing, switched access charge reform, universal ser- District of Columbia sought and oversaw the dis- vice reform, the 700-MHz spectrum auction and mantling of the Bell System. More competition the openness of carrier wireless networks. So do spurred innovation, better service and equipment, your deals and manage your networks, but under- The BOCs are and lower prices. stand that Washington policy-making will affect both. working hard— A Different Time And A Different Result The winds seem to be changing in Washington. so you should, Then Congress declared in the Telecommunica- Careful analysis coupled with effective advocacy too tions Act of 1996 that it wanted the entire domes- once again could make a difference. But if enter- tic telecom market, not just the long distance and prise customers don’t engage on these issues, they equipment markets, to be competitive. But Con- should accept the consequences of their inaction. gress left to the FCC much of the work of imple- Count on the BOCs working hard menting a fully competitive telecommunications market. When confronted with the possibility that local markets might become competitive, the post- Hank Levine and Jim Blaszak are partners in divestiture Bell Operating Companies played the Levine, Blaszak, Block & Boothby, LLP, (LB3) a system hard and well. They beefed up their DC Washington DC law firm that specializes in the offices, hired first rate lobbying and legal help, representation of enterprise users in connection contributed to “think tanks” that publish studies with their procurement of network-related that support BOC positions, and worked cease- services; before the FCC and other lessly to influence political and regulatory deci- telecommunications regulatory bodies; and in sion-makers. disputes with service providers. LB3 and its The BOCs have also been persuasive with their consulting affiliate, TechCaliber, represent scores suppliers. Not surprisingly, companies with whom of large users, including about half of the they spend substantial amounts of money either Fortune 100. Jim and Hank speak and write supported the BOCs’ positions on major issues or widely on telecom sourcing and regulatory chose silence. In the post ’96 Telecom Act era, few issues. See www.lb3law.com and companies have spent more on influencing public www.techcaliber.com. policy than the BOCs. What did the local exchange companies get for their efforts? For one thing, the FCC authorized their entry into the long distance market after find- ing that they had taken the necessary steps to open their local exchange and access service business to competition. At the same time, most of the would- be competitors in the local exchange and access service markets vanished. To be sure, some had poor business plans

MARKET TRENDS

Outsour cing Lesso ns Fr om The xSP s and/or executed their business plans poorly. But

INTERNET INFRASTRUCTURE

Optimizing Multi-Hom ed Connect ions

J AR ANU Y 2002 BCR TEST

WIDE AREA NETWORKS

$5.00 IP-PBXs: R eady And W aiting others bit the dust because of the BOCs’ unrelent- IP: Only B right Spot In A Down PBX Marke t

SECURITY

MAKING THE WAN CONNECTION Email T ampering—T his T ime, The G ood Guys W on How Many B oxes Does It T ake T o Access T he W AN? CARRIER SERVICES

Access Ser ices RollPUBLIC NETWORK Ahead—Slow ly ing (and ultimately effective) assaults on decisions v Unconventi onal W isdom Abou t Local Co mpetition

FEBR AR U Y 2002 Exter nal Data F eeds: The New W eb Of T r ust

WIDE AREA NETWORKS

$5.00 MPLS’ Newe st Applica tion: Laye r -2 VPNs Pr oduct Revi ew: Polyco m

MANAGEMENT STRATEGIES

that compelled them to share their plant with com- SEVCIK Enterprise Network S trategy Af ter The Bu bble MANAGEMENT STRATEGIES Innovation Retur ns T o The Ente rprise Net work Data Prici ng Ready T o Deal? CARRIER SERVICES

PA SSMORE Multiser vice VPNs: What Can Car riers Deli ver? VOICE-DATA CONVERGENCE

Measur ed Use Sti ll Falls F lat Who Put Th e Con In C onver gence?

MARCH 2002 IMHO: Why Packetize V oice In The Access Network? petitors. FINNERAN

ConfessionWIDE AREA NETWORKS s Of AN IP -PBX Sales man

New V alues$5.00 For New T imes Pr isual Network, Foundr

oduct Review: V y Considerat ions For A n IP-PBX E valuation KUEHN

NOLLE BRC TEST 2002: Y ear Of The Conundr um Can W e Light Fi ber’ s Fir OPTICAL e?NETWORKS Beyond Bas ic VPNs

After the change of political control in DC that New Option s For The Optical Ed ge MARKET TRENDS PA SSMORE

Getting Ri d Of The P honeLinux Compa T ur ns T ny en: Findin Bandwidth g A Home I Trading: n Corporat D own e ButAmerica No t Out APRIL 2002

CARRIER SERVICES MULTIMEDIA WIDE AREA NETWORKS HERMAN VOICE NETWORKS $5.00 The Rise O f Rich Med Has ia And Metro Rea E l-T thernetime Confer Coo ledncing Down? Of Pioneer s And V ultur es Reality Ch eck On Fiv e-Nines e followed the 2000 general elections, the FCC KUEHN Optical T echnology UpdateREMOTE ACCESS How Fr ont Runner s T ie Nets T o Business Do-It-Y ourself VP Ns T elecom Afr ica—Lesson Global s Lear ned INTERNET INFRASTRUCTURES MA Y 2002

IMHO: Rate Y our ResponsivenessMy Beloved IP Is Get ting Trash ed WIDE AREA NETWORKS

$5.00 CLECs: The V iew Post-B ankr uptcy SUPPLEMENT: VOICE 2002

Pr vaya,CDN Siemens Busine ss Models— The Drama Continues came to see local exchange competition issues IP-PBXs: M ultifacete d Manageme nt NETWORK SECURITY oduct Review: A Intr usion Dete ction…Or P r evention? SEVCIK Ar e IP Phone s For Y ou? Videoconfe rencing—The Next Leg Up CONVERGED NETWORKS

The Pitfal ls Of Scal ing VOIP SIP Service s: Slowly Rolling Fo rward Critical Y ear For IP Centr ex Had A Secu rity Physi cal Lately ? Product Review: Avaya PA SSMORE BCR VIRTUAL ROUNDTABLE

BCR TEST Can MPLS R eplace A TM? Metro Ether net: Still On The Ho rizon mostly the BOCs’ way. Finally, and in significant NOLLE UNE 2002 MPLS: The Making Of VW ANs? The New Al chemy: Turn ing Bits I nto Gold BUYER’S BLUEPRINT FINNERAN WIDE AREA NETWORKS

5.00 Playing Th e T1 Acces s Game Apple Comp uter—A Reb PA SSMORE el W ithout A C lue Network Ma nagement T ools And T r ends

Lobby Holl ywood, Not Washing ton BCR TEST KUEHN VOICE DATA CONVERGENCE

V oiceXML And The Futur WAN Wa tchers: T esting The Testers part as a result of setbacks at the hands of the A Long, So r r y Saga HERMAN e Of SAL E-Enabling Your Enterprise IP Strives To Matc h TDM’ s Reliabil ity Pr

KUEHN oduct Review: Citel, NEC, Peribit MANAGEMENT STRATEGIES

SEVCIK Carriers As Tax Col lectors Driving Do wn Communi cations Co sts In A T ight Econo my In Sear ch Of The Intelligen t, Pr ofitable N etwork Edg e BOCs, the two companies who were in the best Partnerships —Life And Death For Convergenc e Vendo rs PA SSMORE

Next-Gen R outer Pr ospects

Product Review: Nortel FINNERAN

Fiber’ s Bonfir e Of The V anities position to compete with the incumbents—AT&T NOLLE

QOS: The N ature Of Th e Beast KUEHN

VOIP’ s Coming—L ike It Or PA SSMORE Not

Enterprisi ng Changes and MCI—were themselves bought by the two HERMAN Web Servi ces—The Ha rd Work’ s Just Beg inning

KUEHN largest surviving BOCs. Your Litigation , Anticipa tion, Pers piration Enterprise customers are left with almost no personal copy competition in the access service market and is waiting. diminished competition in long distance. www.cmp.com/bcrmag/subscribe.asp Going Forward There are major issues pending at the FCC that will significantly affect the BOCs, enterprise cus- tomers and other players. In future columns, we’ll discuss these—which include special access pric-

BUSINESS COMMUNICATIONS REVIEW / AUG 2007 65