Nyquist Capital

There is a new Senate Bill in committee - (S.1504) Broadband Investment and Consumer Choice Act

Interestingly, John McCain is a co-sponsor. The dissected proposal does not seem consistent with his public policy.

Here are the highlights (or lowlights, depending on your outlook):

1. Creates barriers for local municipalities that try and build broadband networks including:

• Forcing governments to outline what services will be offered and at what cost and allowing the private sector to bid competitively
• Gives the private sector “The ability to place facilities in the same conduit, trenches, and locations as the State or local government for concurrent or future use”
• “Preference for Non-Governmental Entities- In the event of identical bids […] the neutral third party conducting the bidding process shall give preference to a non-governmental entity.”

2. Allows Carriers to develop application specific restrictions:

• A consumer may not be denied access to any content provided over facilities used to provide broadband communications service and a broadband service provider shall not willfully and knowingly block access to such content by a subscriber, unless–(A) such content is determined to be illegal; (B) such denial is expressly authorized by Federal or State law; or (C) such access is inconsistent with the terms of the service plan of such consumer including applicable bandwidth capacity or quality of service constraints.
• EXCEPT for VoIP. “Nothing in subsection (a) shall permit a broadband service provider to prevent a customer from using voice over Internet Protocol applications offered by a competitor.”

3. Ends the local video franchise concept:

• Video Service Providers- A video service provider may not be required– (1) to obtain a State or local video franchise; (2) to build out its video distribution system in any particular manner; or (3) to provide leased or common carrier access to its video distribution facilities and equipment to any other video service provider.
• It also limits local governments to 5% of ‘video’ revenue, but defines video revenue in a very narrow manner. A number of exceptions are made that would allow a provider to argue a service is not a video service

4. Legislates unbundled access to copper - again:

• Copper needs to be shared from the customer to the CO and if this is not technically possible, the carrier must virtualize it. Seems like this would encompass fiber to the pedestal approaches such as AT&T (T ) (SBC’s) Project Lightspeed. The FCC had previously indicated FTTP approaches, as hybrid copper/fiber, did not need to be unbundled.
• Applies to LECs only, not cable companies. This would protect the cable companies and not challenge the recent Brand X decision against Earthlink, but prevent LECs from using the same court ruling to prevent the unbundling of their DSL lines.

All we can say here is - wow! I would think that many people would have strong opinions about this bill, yet coverage has been thin. This legislation touches on several issues and assumptions in our core philosophies and we feel this legislation would have a dramatic impact on markets.