Grant Gross,
IDG News Service\Washington Bureau
February 18, 2003, 14:10
From IDG
The U.S. Federal Communications Commission (FCC) will soon decide on new
rules governing the sharing of local telephone networks, but the decision
may have an impact on the roll-out of broadband Internet services across
the United States as well.
The FCC is
scheduled, pending the Washington area successfully digging out of a huge
winter storm, to make a decision on Thursday on what network elements
the regional Bell operating companies (RBOCs) should share with their
competitors. Among the questions for the FCC: whether the regional Bells
must share access to high-speed lines they build in the future.
Right now,
the regional Bells must share their lines with other DSL (Digital Subscriber
Line) providers, but it's unclear whether the Bells would have to share
the lines from any "advanced services," such as cable modem
lines or next-generation broadband Internet services faster than DSL,
said Allison Hift, director of the telecom practice at Becker & Poliakoff
P.A., a law firm based in Fort Lauderdale, Florida.
The question
over what broadband network elements the RBOCs will have to share "really
reaches to the heart of the matter," Hift said.
The main
question for the FCC, in its so-called triennial review, is whether the
four regional Bells should have to share some pieces of their local networks
with competitors at discounted prices, the renting of the last mile, so
to speak. The RBOCs, including Verizon Communications Inc. and SBC Communications
Inc., argue that the network-sharing plan discourages investment, by themselves
and their competitors, in new telecommunications facilities, and it has
contributed to the slump in the telecommunications industry by allowing
too many competitors to get into an artificial marketplace pumped up by
government regulations.
On the other
side are companies like WorldCom Inc. and AT&T Corp., collectively
called competitive local exchange carriers (CLECs), who argue that the
Telecommunications Act of 1996's line-sharing plan is working. The CLECs
and several consumer groups say competition for local phone service has
sprung up in many areas of the U.S., and the price of local phone service
has generally dropped since the law passed.
Few FCC observers
will speculate on what exactly might happen when the FCC meets Thursday.
The commissioners are under a tight deadline -- Thursday is the day a
U.S. Court of Appeals ruling goes into effect, vacating the current network
unbundling rules.
Some observers
suggest that the FCC may reach a compromise between Chairman Michael Powell,
who wants to free the regional Bells from the current unbundled network
element (UNE) regulations, and Commissioner Kevin Martin, who wants the
power to set unbundling rates to rest with state public utility commissions.
It's likely
that the FCC will keep some line-sharing regulations in place in rural
areas and in the home and small-business local phone service markets,
while ending the line-sharing requirements in the urban, large-business
market, a couple of FCC observers predicted. "What I see is that
there may be some type of compromise on a geographical perspective,"
said Hift, the Florida telecom lawyer. "The Bells wouldn't be required
to provide access to switches in large urban areas, where these competitors
already have their own facilities in place."
Hift and
other proponents of the current system argue that the regional Bells received
a huge competitive advantage when they were granted the local phone networks
after the U.S. Department of Justice broke up the AT&T phone service
monopoly in the early 1980s.
"In
my opinion, I still think we need these types of regulations in place
to ensure that the smaller providers can provide the services they need
to without having to make the capital expenditures in rolling out their
own networks," she said. "We need to give the marketplace a
chance to work, and in my opinion, we need to see these types of rules
in place for it to work. Competition needs to be boosted, and I think
we need these rules to do that."
Representatives
of Verizon and SBC did not return phone calls seeking comment, and representatives
of the Washington-based United States Telecom Association (USTA), representing
the regional Bells, were unavailable Tuesday because of the winter storm.
But the USTA has argued that the wireline telephone industry is "laboring
under antiquated regulations," and a new UNE policy would "create
jobs, boost investment and restore stability to the telecom industry."
Greg Blonder,
a former chief technical advisor to AT&T and currently a general partner
at Morgenthaler Ventures, based in Menlo Park, California, agrees that
the rules need to be changed, but he suggests the regional Bells should
have to give something back in return. A ruling favoring the regional
Bells, he argued, would spur overall investment in broadband and new technologies.
Few people will invest in the depressed telecom industry if the regulatory
future is uncertain, and allowing the 50 states to set their own rules
won't bring enough stability to the industry, he said.
Blonder compared
the telecom rules to "asking Southwest to carry United customers
on their planes at a discount."
"The
reality is that there is simply not enough profitability in the industry
to support multiple players going after the same market in the same way,"
he added.
The "last-mile"
of phone service into people's homes and businesses may be a natural monopoly,
Blonder suggested, but if the regional Bells are granted that monopoly,
they should have to provide a level playing field for all services that
run on top of the network, such as voice mail. That compromise would be
a more workable solution than what's being considered at the FCC, he said,
because Powell's proposal "only addresses half the problem"
by not demanding anything back for the RBOCs' unfettered use of their
networks, and Martin's proposal "abdicates responsibility" by
leaving the decision with the states.
"You
can imagine a world where you have, reasonably speaking, three serious
providers of raw bandwidth, cable companies, wireless companies, and RBOCs,"
Blonder added, "and hundreds of people providing services on top,
and that could work."
But James
Bradford Ramsay, general counsel for the National Association of Regulatory
Utility Commissioners, argued that the state utilities commissions are
the best place to monitor local phone service competition.
"The
crucial issue involves upholding the authority of state officials to craft
solutions best tailored for their own states," added Peter Arnold,
spokesman for the Voices for Choices coalition of CLECs and consumer groups.
"This is no time for federal regulators in the cozy confines of Washington,
D.C., to tell regulators in Wyoming or Rhode Island or Texas how to manage
their own networks."
Right now,
the FCC sets general guidelines and states have some latitude in setting
their own UNE rates, Arnold noted. Ramsay's group argued that the appeals
court ruling was critical of a "uniform national rule."
It doesn't
make sense for the regional Bells to set their own rates, as Powell's
plan advocates, Arnold argued. "What will probably happen is the
FCC will potentially say to the Bells, 'you are under no obligation to
lease your networks,'" he said. "'If you choose to do so, you
can set the rates at $2, or you can set the rates at $500.'"
The impact
to consumers could be disastrous, Arnold said. "Who is best served
by letting the Bells set their own rates?" he asked. "The Bells."
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