Copyright 2003 MarketWatch.com Inc., All Rights Reserved
August 21, 2003 Thursday
Washington (CBS.MW) — Six months and 485 pages later, a fractured Federal Communications Commission on Thursday issued new rules to reshape phone-industry competition — rules likely to trigger a spate of fresh lawsuits.
The agency, as expected, extended more authority to state regulators, who’ll be able to ensure that competitors maintain access to the local networks of the Baby Bells at low wholesale rates.
The FCC also offered some relief to companies such as Covad that use a portion of the Bells’ copper wires to deliver high-speed Internet access to customers. While the agency plans to phase out so-called line-sharing requirements within three years, existing customers will be grandfathered in.
Covad and other high-speed suppliers could still receive wholesale rates if they pair up with other carriers such as AT&T to provide consumers with a package of local phone and high-speed Internet service.
Indeed, both AT&T and Covad reacted favorably to the lengthy and complex FCC decision despite complaints about the more stringent line-sharing requirements.
Yet the Bells, to the dismay of the FCC panel’s two Democrats, were granted a potential escape hatch from what they view as burdensome government regulations. If they lay down more fiber optic wiring, those portions of their local networks could be exempted from wholesale price regulation.
The FCC’s goal is to promote more investment in broadband service. Whether the agency will succeed is far from clear, however. The Bells are reluctant to commit billions of dollars to investment in new fiber at a time of stiff competition and stagnant sales – trends fostered in large part by existing wholesale requirements.
Indeed, the Bells have fought regulatory requirements in court for years, and most analysts expect them to resume the legal battle.
The initial reaction of the Bells was cautious.
“It took the FCC two years to decide and write the order; we need time to read and understand it,” said Tom Tauke, Verizon’s top lobbyist in Washington, D.C. “The world is changing so fast the order may already be outdated.”
The FCC’s review of existing phone-competition rules, has been marked by sharp disagreement.
Commissioner Kevin Martin, though a Republican, sided with the panel’s two Democrats in a 3-2 vote. Michael Powell became the agency’s first chairman to cast a dissent in more than a decade.
Powell had sought to allow the Bells to exempt portions of their networks from rivals or to charge higher prices. He argued that independent competitors saw little incentive to build their own networks if they could piggyback onto the local lines of the Bells.
Powell also disagreed with the decision to lift line-sharing requirements, saying the rule had sped up deployment of DSL, or high-speed Internet access. Smaller local phone companies, Internet service providers and consumer groups were also disappointed by that ruling.
All together, the FCC does not appear to give much relief to the Bells, which have lost millions of phone lines to rivals that lease access to their local networks under federal requirements.
The FCC, for its part, was forced to revise its rules after a federal court in Washington questioned the agency’s rationale for existing regulations.
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