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Bells Free From DSL Obligations

The Baby Bells can pop the cork on the chilled champagne. In a significant policy victory for the incumbent carriers, the Federal Communications Commission (FCC) unanimously voted today to eliminate DSL line-sharing rules.

The vote came just 39 days after the Supreme Court upheld the FCC's authority to declare cable modem broadband an information service not subject to the myriad rules and regulations faced by the Bells' high-speed broadband offering.

Today's vote by the two Republicans and two Democrats on the FCC (the fifth position is currently vacant), puts the Bells' broadband DSL service on equal regulatory footing with the cable companies.

To ease the transition for Internet service providers (ISPs), such as EarthLink , that lease discount lines from the incumbent carriers, the FCC imposed a one-year transition period on the Bells in which they must continue to offer discount line prices to competitors.

After that, EarthLink and other ISPs will have to negotiate wholesale prices with the Bells. The one-year clock is expected to start ticking sometime in early October.

FCC Chairman Kevin J. Martin called the agency's action "momentous" and said it would level the playing field between cable companies, the current market broadband leader, and telephone companies.

"It ends the regulatory inequities that currently exist between cable companies and telephone companies in their provision of broadband Internet services," Martin said, adding the vote is an "implicit recognition that the telecommunications marketplace that exists today is vastly different from the one governed by regulators over 30 years ago."

Martin said today's broadband market is characterized by multiple platforms that are "vigorously competing for customers. Such changed market conditions require ... a fresh analysis."

In addition to the one-year transition period to wean ISPs off the government-set discount rates for Bell DSL lines, the FCC is also requiring the incumbents' high-speed service to continue to contribute to the Universal Service Fund (USF) for nine months or until new rules are in place.

"Either way, the [FCC] will act diligently to ensure that there will be no adverse impact to the fund as a result of the holdings today," Martin said.

While the decision was unanimous, at least Commissioner Michael Copps' vote was begrudging.

"I objected strenuously to our original reclassification of cable modem and our tentative reclassification of wireline broadband," he said. "But the Supreme Court has fundamentally changed the legal landscape."

Copps and other critics of closing the broadband networks of telephone and cable companies fear a possible duopoly controlling network content. Incumbent telephone companies and cable companies control more than 90 percent of the U.S. broadband market.

Public Knowledge, a public-interest advocacy group, issued a statement expressing disappointment with the FCC vote.

The group's legal director, Mike Godwin, said the FCC "did not take all the necessary steps to ensure that broadband networks remain open as service providers continue to be deregulated .... We believe consumers and the market would have benefited if the FCC had included an openness requirement in the order itself."

Instead, the FCC issued a policy statement that has no force of law behind it.

The statement calls broadband providers to preserve and promote the open and interconnected nature of the public Internet. The FCC statement also says consumers are entitled to access the lawful Internet content of their choice and they should have the freedom to run the applications and services of their choice.

Not surprisingly, the Bells were delighted with the ruling.

"Today's ruling is a significant accomplishment by the FCC," James C. Smith, SBC senior vice president for FCC issues, said in a statement rushed out only minutes after the FCC vote. "The benefits of this ruling will ripple across our communities by encouraging greater investment in and a wider rollout of broadband networks."

He added, "Discarding decades-old requirements and regulatory assumptions that are out of sync with today's competitive broadband marketplace will also spur more innovative products and services for consumers."