HOUSE BROKEN

Welcome to the new world of telecom. Last week's passage of the Tauzin-Dingell bill in the House didn't come as much of a surprise, nor will its death in the Senate. The real surprise will come if, by giving incumbent carriers the leeway they're looking for, the bill sparks the economic revival its proponents are promising.

As part of the required political rhetoric that goes with any hotly contested legislation, supporters of Tauzin-Dingell have positioned the bill as an instrument that will lead to overall economic recovery. Focusing not on the data long-distance provisions — which have received most of the ink in the general business press — but on lifting some unbundling and network sharing requirements, the bill's backers argue that ILECs need a push toward greater network investment.

The logic behind the argument is that if ILECs are freed from the onerous requirement of sharing their broadband networks, they'll have the incentive needed to invest in the expansion of those networks.

It makes for great political theater, but that argument is somewhat shortsighted. To buy into the theory behind the argument is to assume that telecom investment exists in a vacuum. Whether carriers need to be induced into pumping more money into their networks is a debate that will go on for some time and, if history provides any guidance, likely will end up as the crux of a lawsuit by one of the few remaining competitive carriers.

Carriers are an integral part of the overall economy, and like any large cog in that machine, they are influenced to a great extent by outside factors. Carriers will not lead an economic recovery, but most certainly will contribute to it once it gets rolling.

Perhaps it is just some sort of cosmic coincidence that the same week the House of Representatives passed the Tauzin-Dingell bill, Williams Communications announced it is considering filing bankruptcy, and Focal Communications was put on some analysts' Chapter 11 watch lists.

At last week's Robertson Stephens conference, presenter after presenter pushed the timetable of a telecom recovery back to the end of 2002 at the earliest. Tauzin-Dingell, and the relief contained therein, didn't appear in anyone's equation.

Most would argue that ILECs are going to get what they want from Washington eventually. The impending death of the Tauzin-Dingell bill just means they will get most of the provisions in a piecemeal fashion.

The question one must ask, though, is whether carriers will lead the recovery or simply take part.