The American essayist Ralph Waldo Emerson is credited with coining the aphorism, "Consistency is the hobgoblin of little minds." Emerson actually made his observation about "a foolish consistency," not consistency altogether.

The commissioners of the US Federal Communications Commission might be trying to avoid Emerson's wrath no matter what he said. In recent decisions—both announced the same day, 5 August 2005—they use almost completely contrary logic to decide the status of network carriers' services. In one case (http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-260433A1.pdf), the commissioners adopted policies to classify broadband DSL services as "information services." This classification freed incumbent telephone companies—specifically, the regional Bell operating companies (RBOCs)—from mandated sharing of DSL facilities with competitors. In the second case (http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-260434A1.pdf), they ordered some of these newly classified information services to act as regulated telecommunications services when law enforcement agencies seek wiretaps.

For enterprise customers, the inconsistency might bring the worst of both worlds—more expensive services with less competition, plus unforeseen consequences for their firms' confidential communications.

Washington, DC-based attorney Colleen Boothby specializes in telecommunications issues at the firm Levine, Blaszak, Block, and Boothby. Among her clients are some of the largest telecommunications purchasers in the US, and Boothby says they're not happy about the direction federal policy is heading.

"When policymakers at the FCC and on Capitol Hill talk about broadband," she explains, "their model seems to be residential Internet access, which is a tiny slice of the broadband world. And their thinking seems to be that a duopoly between the cable companies and phone companies is good enough to deregulate."

According to Boothby, the market hasn't yet produced alternative technologies to support competitive options for enterprise customers. "Cable is not an option in the enterprise market," she says. "Wireless, not here yet. Broadband over power line, not here yet. Satellite, not an option for technology reasons. So quit talking about competition and start telling me what you're going to do to regulate the BOCs."

In pleadings prepared for the FCC on behalf of the Ad Hoc Telecommunications Users Committee, an enterprise customer group that includes 10 of the Fortune 100 companies, she explains that incumbents' rates of return have climbed steadily since the Telecommunications Act of 1996 became law. The rates have now reached levels that signal a noncompetitive market.

"The average rate of return for the special access category for the four RBOCs was 53.7% for 2004," the pleading reads. "The 53.7% return level represents the latest in a series of year after year increasing special access earnings levels—up from 43.7% in 2004. Clearly, neither existing competition, nor the threat of potential competition is working to constrain the ILECs' [incumbent local exchange carriers] market power."

Special access is the FCC's term for all services other than basic switched access.

To truly gauge the market's competitive health, Boothby suggests looking at carriers' rates of return as well as their competition. She sees no competitive local exchange carriers (CLECs) that have facilities to compete with the BOCs.

"About two percent of commercial buildings are served by CLECs who can pierce a building without depending on a BOC for access in the final mile," Boothby says. "The rest have to buy from the BOCs. It's a monopoly, and a lot of that two percent is networks run by AT&T and MCI, who are about to get bought by a BOC, so even those competitive facilities are about to disappear."

Cable is the only existing large-scale competitor, Boothby says, and it hasn't evolved to serve enterprise requirements. It's often not available. Even when it is—for example, in small businesses located in strip malls near residential neighborhoods or in the small office/home office (SOHO) market—reliability problems and bandwidth limitations rule out encryption and IP VPNs.

"If you're a bank deploying an ATM network, people have to get their money. You can't say 'We'll be down a couple hours because the cable's down.'"

Jay Shell is a telecommunications specialist for a large Michigan-based bank and also vice president of committees for the Enterprise Network Technology Users Association (http://www.entua.org). ENTUA represents enterprise customers of various sizes. Shell says home offices and branch offices are proliferating—not just in banking, but in many industries. Yet he and his colleagues are struggling to find ways of ensuring their networks stay up in a market with limited choices.

"Our business is very Web oriented," he says. "We have a lot of lending management professionals working out of small offices. It's an effective piece of expanding our applications out in the world, and limiting that would be restrictive. And many like companies are also affected by the marketplace. For instance, many insurance professionals work out of their houses. Home-building companies need connectivity to new home sites while construction is ongoing. Much of corporate America needs this connectivity, much more so than policymakers may be aware."

The problem "hit SOHO" recently for networking consultant Scott Bradner (http://www.networkworld.com/columnists/2005/091205bradner.html), when an outage left him without broadband service for six days. Bradner is the Internet Engineering Task Force's (http://www.ietf.org) liaison to the International Telecommunications Union. He's also a former director of the IETF's transport area and the recipient of its 2000 Jonathan B. Postel Service Award.

He says as long as policymakers' judgment is focused on facilities-based competition over services-based competition, enterprises trying to extend their networks to remote office and SOHO locations will face limited choices and probably higher prices.

"When you've only got two solutions, cable and DSL, I can't see rates going down. Cable has raised their rates across the board. DSL is considerably less expensive; there's actually been some reduction in rates, but it's really much poorer."

While experts such as Bradner and Shell see limited options for remote network users, FCC Commissioner Kevin Martin stuck by his belief that leveling the playing field between the two predominant delivery vehicles would lead to lower prices and more innovation. In his statement accompanying the announcements, Martin wrote, "I believe that, with the actions we take today, consumers will reap the benefits of increased Internet access competition and enjoy innovative high-speed services at lower prices."

One long-time European observer says the FCC's reliance on facilities-based competition is causing concern about how much competition will emerge, especially compared to the service-based competition mandated in some EU nations.

"The position in the European Union is that unbundled access to local loops has been shown to be the best way to achieve competitive markets where there are well-developed copper networks," says Ewan Sutherland, executive director of Brussels-based INTUG (International Telecommunications Users Group) (http://www.intug.net/main.html). "Where this has been properly implemented, then market entry, including cross-border entry, has been successful.

"Perhaps the premier example is France, where work by the public authorities has transformed the market into one that is highly competitive based on local loop unbundling. Line speeds have risen rapidly, not least with the deployment of ADSL2+, offering 20 Mbits per second. Bundles of services have grown, with flat rate, monthly prices for calls to any telephone on the fixed network throughout France. The incumbent offer from France Telecom's Wannadoo is constantly challenged by Noos, by Free, and by others."

Virtual private networks are one way enterprise customers might look to extend their networks to branch offices and SOHO users. The new decisions might encourage carriers to support VPNs. While many service providers used to limit or ban VPN deployments to these environments, they have liberalized those policies and, in some cases, will supply an end-to-end VPN service, according to Bradner.

These VPNs might include the on-site VPN equipment as well as fractional T-1 lines that connect to the carrier's nearest point-of-presence. In addition, Bradner says at least one carrier also offers VPNs based on multiprotocol label switching. MPLS is an IETF standards-track protocol that companies can use to establish private addresses within their VPN access without interfering with public IP addresses.

"At a branch which should not be on the Internet, this is a fine solution," Bradner says. "You could do it for SOHO addresses, but unless the person at home is the bank president or another high-ranking executive, it might be prohibitive. It's not cheap, a few hundred dollars a month. But as long as the carrier isn't blocking ports, a VPN is doable."

Letting a carrier supply a VPN for its remote offices might make economic sense. However, it could also limit an enterprise's control over the confidentiality of its messages, Bradner says.

"The current rule set that has been proposed is that if the carrier knows the encryption key, it has to surrender it. So if your VPN solution is from the carrier, or it's carrier-provided customer premise equipment, the encryption key is known to the carrier and law enforcement people can get those. It's a problem. If law enforcement has to go to a corporation with questions about an employee, then the company's general counsel can vet the request. If the request goes through the carrier, it can be accompanied by a demand the company never knows about it."

Additionally, under the Patriot Act, law enforcement personnel can issue a National Security Letter (http://www.eff.org/patriot/sunset/505.php) to an ISP without a judge's warrant. This might also compel an enterprise to spend more money in-house to avoid losing control over encrypted communications.

"A friend of mine is CTO at a major ISP," Bradner says. "Half of their NSL requests came from local law enforcement, and of those, three quarters turned out to be improper. From the federal agencies, 100 percent were proper. There is a surprising amount of local police folks on witch hunts."

If you believe the policymakers, the new landscape will remove the sharing requirements that incumbents claim have stifled investment. That means new services and features will make expanding networks easier and cheaper. But if these promises don't hold, those who need the most room to innovate might find themselves paying more for less, with a healthy dose of paranoia thrown in for good measure.