The Internet broadband market has not followed the trends in the long distance and cellular markets. ADSL (Asymmetric Digital Subscriber Line) is one of the most popular technologies for broadband connections because it uses the same copper wiring used for residential phone lines but since it does not go via a switch to get to the ISP it is not limited to the 56 Kbps of standard dialup connections. ADSL allows speeds of up to 9000 Kbps (the more typical limit is 1500 Kbps due to distance restrictions) and can send voice on the same line using another frequency, allowing the subscriber to use the Internet and make phone calls using the same pair of wires that he or she used for the telephone. A simple interpretation of the Act of 1996 would indicate that the telephone companies are required to allow access to this lines to its competitors using fair rates based on their costs.

Unfortunately, phone companies have argued with the FCC that as broadband requirements increase, significant investments will be required in new infrastructure. Of the market eventually requires over 10,000 Kbps the copper wiring will need to be replaced by fiber optics or another technology. This motivated the Tauzin-Dingell act in early 2002 to regulate broadband using different criteria to those used with other components of the telephone infrastructure. This act has not been converted to law and has been heavily criticized for protecting phone companies at the expense of consumers. The Breaux-Nickles act is another attempt at this area that has also been criticized. A study at Stanford shows that many of the arguments used by telcos are not valid and indeed slow down the growth in the broadband market by limiting to the price and service options offered by telcos. It is not fair to restrict access to existing cabling with the pretext of justifying a future investment in new infrastructure. The same argument could be made on other markets such as long distance and cellular services where it would be totally counter-productive to consumers.

In Puerto Rico the phone company (where Verizon is the major shareholder) started provisioning ADSL in volume during the summer of 2001. At the time the regulatory environment appeared to require equal access so their management unofficially indicated that their subscribers would have freedom of choice among providers by the end of 2001. After the Tauzin-Dingell act, the phone company returned to the monopolizing tactics used previous to the Act of 1996 and has not allowed a choice of provider to its ADSL subscribers. This means that no other company in Puerto Rico can offer higher speeds or lower prices in ADSL using the existing wiring. Plans offering 768 Kbps for $ 40 per month, common in the US, are not available in Puerto Rico. It is clear after the experience in Korea that low price levels are critical to high volumes in broadband connections. There competition has brought prices as low as $ 25 per month, a level that would not be feasible in Puerto Rico with the current monopolistic attitude of the phone company.

Even though it is one of the main shareholders in the local phone company, the local government has not taken any action to promote free choice and achieve this great benefit for its people. Without government intervention or a mass consumer protest we are forced to accept what the phone company is willing to offer, irregardless of whether it is competitive or not with offerings at other locations. The legislature can require the phone company to open the broadband market based on principles of free trade and social justice.

Rev: Oct-30-02