Local Loops

Anytime someone says that 'so and so carrier is not viable because of the local loop problem,' you need to run. If you are not BellSouth, Qwest, Verizon, or SBC, you have the local loop problem because those four own the local loop - the 'last mile' of the network which runs from the telco's CO (central office, where the phone switches, routers, etc. are located) to your house.

Why did the DSL providers Northpoint, Rhythms, Cypress, et al. go tits-up? Because SBC, Qwest, Verizon, and BellSouth kept jacking up the rates they charged them for local loop access. The DSL providers were charging $49.95 for 512Kb, $79.95 for 1Mb, but the phone companies were only charging $1K for a T-1. The phone companies looked at the revenue they were losing and decided to get even. They raised the rate to $40 (or thereabouts) and the DSL providers were caught - nobody in the telco world can survive on a $9.95 margin.

So when a talking head complains about GBLX (or any other carrier) not owning the last mile, it's time to tune out, because only those four RBOCs own the last mile - which is the reason they're still standing as kings of the hill.

But that local loop is expensive to maintain. There aren't mountains of money to be made in the local phone business, which is the sole reason they want in the long distance market: it's more profitable, though not by much - although that will change if Sprint, WCOM, and AT&T go under/get bought, since there will be less competition.

Qwest bought US West only a couple of years ago: a long distance company trying to get around the local loop issues by buying a local phone company. And BellSouth has had its eye on Sprint for some time.