Subject: [NEXTEL-1] FCC rings 'Bell' for telecom changes

From: Marcel <[email-masked]>
Date: Fri, 28 Feb 2003 02:56:29 -0500

FCC rings 'Bell' for telecom changes
By Ben Charny
CNET News.com
February 20, 2003, 4:41 PM PT
URL: http://zdnet.com.com/2100-1104-985324.html

Update The Federal Communications Commission on Thursday backed away from a
sweeping overhaul of the telecommunications industry, but new rules for broadband
Internet services could raise prices and lead to a new generation of high-speed links.

In a 3-2 vote marked by many layers of dissension, the agency handed FCC Chairman Michael
Powell
a major defeat in his plans to scale back competition rules set up in the 1996
Telecommunications Act.
But the chairman won on one important front: the future of broadband.

Thursday's decision will likely have a major impact on providers of high-speed Internet
access,
particularly digital subscriber line (DSL) services that use the local phone loop. As a
result of the vote,
the Baby Bells--Verizon Communications, BellSouth, SBC Communications and Qwest
Communications International--will not be required to give their rivals both access and
discounted
rates for broadband facilities such as fiber-optic networks that they might build in the
future.

In addition, the Bells will no longer be required to lease high-frequency portions of
their copper lines to
DSL providers under so-called line-sharing arrangements, a measure that could boost costs
for
companies that currently rely on such deals.

The decision does not affect cable, satellite or wireless services, which are typically
not bound by the
kind of facilities-sharing requirements that rule the local phone industry.

Verizon Senior Vice President Tom Tauke said a legal challenge is most likely. "The FCC
clearly
blew it. This is not a shining moment for good government," he said.

Despite losing on several other fronts, Powell called the broadband decision "a momentous
step" that
effectively deregulates the broadband industry. Like almost everything else in the FCC's
decision,
however, the broadband provisions were hotly debated among the commissioners. For example,

while Powell supported the FCC's position on future broadband such as fiber networks, he
opposed
the decision on line-sharing. In addition, although Commissioner Michael J. Copps
supported the
decision on local phone competition, he voiced a bitter dissent regarding the broadband
provisions.

"We are playing fast and loose with the country's broadband future," Copps wrote. "Today
we may be
choking off competition in broadband. Consumers and the Internet itself may well suffer."

Covad Communications will likely take the heaviest hit from DSL
deregulation, having made a business from it.

"Today the FCC passed on the opportunity to guarantee that
broadband competition continues on a level playing field across the
country," Covad CEO Charles Hoffman said in a statement.

Others that may be affected include AT&T, which in a statement
praised the provisions regarding local phone service but cautioned
that it "will look carefully at the order's provisions affecting the
offering of DSL service over fiber loops."

AT&T and Worldcom have built some high-speed networks of their
own. Those networks, which are serving mainly business customers,
are not affected by the decision.

On balance, Thursday's decision offered a mixed result for the Bells,
which had lobbied hard for more drastic steps championed by
Powell. The Bells will still have to open up their phone lines to local
competitors at the steeply discounted rates the current regulations
require, giving local phone competitors such as AT&T a boost.

Also, the states will get more clout in deciding whether the Bells
should be required to open up their networks, and in what locations.
The FCC had been the only agency with the authority to handle
requests to offer service in new markets. Under the new rules,
state-level public utility commissions will do most of the deciding
instead. States had been clamoring in the past few weeks for just
such a decision, and insiders believe their push for power helped topple what had seemed
an
imminent Powell victory.

At the heart of the tussle was the 1996 Telecommunications Act, which handed the FCC broad

authority to undertake a set of rules regarding interconnection and open access to the
Bell
companies' networks. The law says the Bells must provide access at a price that state and
federal
regulators can reject as unreasonable or not in the public interest. Another phrase for
this is
Unbundled Network Elements Platform, which allows companies to compete with the Bells by
delivering service without laying their own copper or fiber infrastructure.

On one level, the vote represents the tail end of a high-stakes power struggle at the
FCC's 12th
Street headquarters between lobbyists for companies such as Verizon and SBC that own local

telephone networks and a host of rivals such as AT&T and WorldCom that want to connect to
them.

Broadband battle
The FCC's painstaking internal deliberations also highlight an ideological conflict
between two wildly
different views of how to keep broadband prices low and competition robust: Should federal

regulations be strengthened or rescinded? The FCC's answer will likely determine not only
the
winners and losers in the broadband race, but also how much consumers will pay for
high-speed
access, and how the technologies are to be implemented.

The proposal that won the FCC's support was crafted by commissioners Kevin Martin--a
Republican appointed by President George W. Bush--and Democrats Michael Copps and Jonathan

Adelstein.

"I believe in limited government," Martin wrote of his decision. "I believe that
competition--not
regulation--is the best method of delivering the benefits of choice, innovation and
affordability to
consumers."

He also applauded the new power states have in deciding the future of telephone service in
their
areas. Martin and his supporters argue that federal regulators are too far removed from
individual
telephone markets to accurately judge whether to enforce the FCC's competition rules.

"We...recognize that competitors face different operational and economic barriers in
different
markets," Martin wrote.

The vote followed a bitter political tug-of-war that was enough to postpone the decision
on the
proposal last week, after sharp differences of opinion emerged between two Republican
commissioners. The formal name of the process is the FCC's Unbundled Network Element
Triennial Review, and it does not cover cable modems, wireless or satellite connections.

The deregulation camp was led by Powell, a Republican who wanted to relax rules that let
competitors of companies like Verizon and SBC demand access to the former Bell networks at
a
relatively low cost. With that access, rivals can sell DSL or voice telephone service and
compete
with the Bell companies that own the copper and fiber lines.

As recently as the beginning of February, Powell appeared to have secured a majority of
commissioners who were prepared to erase the access requirement entirely. But Powell's
proposal
lost its support in recent weeks, and the deals holding the agreement in place have
unraveled, one
source familiar with the situation said.

In a statement, Powell said he was disappointed with some elements of the decision,
including the
requirement that the Bells still keep their networks open to the competition.
"Nonetheless, it is the
fair result of a democratic institution in which majority rules," he wrote immediately
following the
decision.

He also warned the public utility commissions that they now have "an enormous task before
them,
and I sincerely wish them the very best as they struggle through what the FCC could not."

He also said he was going to be "watching" whether local long-distance companies that
lobbied so
furiously "will now prove their value in the marketplace and actually deliver the local
competition,
lower prices and more innovative services that they insisted they would if they
prevailed."

Reaction to the decision was sharply divided. The Bells lambasted the commission for
continuing to
regulate long-distance services, while consumer groups and the smaller phone providers
said
broadband competition will suffer.

AT&T published a statement praising the FCC's decision on local phone service, while
remaining
cautiously skeptical of the Bells' new freedom in the DSL market.

For consumers, it's a bleak day, according to the Consumer Federation of America. There
are
about 40 million DSL subscribers now in the United States, and today's decision will
likely choke
off any future growth, one consumer group said.

"Today's decision will mean higher prices and fewer choices for consumers in high-speed
services,"
said Mark Cooper, Director of Research of the Consumer Federation of America. "The FCC's
action today is highly ironic. The rules the Commission adopted preserve competition for
20th
century technology while ensuring monopoly for 21st century technologies."

Bellsouth Chairman Duane Ackerman said in a statement that the continued presence of
regulations
will put at risk the U.S.'s global "telecommunications leadership."

The decision "will choke the flow of new telecom investment and will jeopardize the
economic
recovery that must eventually be lead, at least in part, by the tech and telecom sectors,"
Ackerman
said.

"It will impose still more regulation on the ailing telecommunications sector, a sector
which has seen
losses topping $1 trillion in market value, and job losses of more than 500,000 in the
last two
years," Ackerman wrote in his statement.

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