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California PUC To Regulate State DSL

In a move destined to send shockwaves through the sector, the California Public Utilities Commission (CPUC) has ruled that it has the authority to regulate DSL-based Internet services.

The declaration makes California the first state in the nation to take an authority position over the delivery of broadband Internet services provided by local telephone companies.

DSL prices and connection speeds will still be the jurisdiction of the Federal Communications Commission, but California will now oversee how providers serve their customers and competitors in the same way it oversees the state's power and telephone companies.

The FCC, which has been looking at reclassifying its broadband rules for DSL, recently approved a rule change freeing the cable industry from regulations that typically are applied to "telecommunications services," including making access to their lines available to competing Internet service providers.

The landmark move stems from a bitter battle between the California ISP Association (CISPA) and Pacific Bell and its parent company SBC Communications .

In its ruling, the CPUC mainly referenced the FCC's 1998 GTE Order in denying SBC's claim that the CPUC did not have a say in the state's telecommunication's market.

"We find that the Commission has concurrent jurisdiction with the FCC over DSL Transport service, for several reasons. First, the FCC has not explicitly barred all state regulation. Nothing in the FCC's 1998 GTE order says the PUC cannot exercise jurisdiction over certain aspects of DSL Transport service," PUC President Loretta Lynch and Administrative Law Judge Dorothy Duda said in a statement.

The ruling is expected to have the biggest impact on large-scale DSL providers like SBC, AT&T and Verizon .

"This is a victory for consumers, small business and the Internet as a whole," said Jim Pickrell, CISPA president and owner of BrandX Internet, an independent ISP. "By asserting its right to protect the businesses and citizens of the largest state, the California PUC has sent a message to Washington, D.C. that states will not sit still while local phone companies manipulate their control of the public phone networks to establish a DSL monopoly for their own Internet subsidiaries. By rejecting SBC's attempt to destroy traditional public-spirited oversight, the California PUC continues its leadership role in bringing the benefits of competition to public services."

The tumultuous fight began back on July 26, 2001, when CISPA, which represents 130 Internet service providers in California, alleged that SBC participated in unfair business practices in the high-speed Internet access market. CISPA says the CPUC's regulatory status for carriers in the state is one of the last stopgap measures the smaller providers may have that would prevent a monopoly by SBC in California's DSL market.

SBC has also asked the California PUC to allow it to enter the state's $17 billion long distance market. To get approval, SBC has to prove that SBC's control over California's telephone facilities properly supports competition among Internet service providers, including independent ISPs. CISPA's original complaint claims that SBC has failed to provide fair and non-discriminatory access to the phone networks.

On October 23, 2001, SBC Communications filed a motion claiming that the California PUC had no jurisdiction over SBC's DSL services in California. The motion was filed despite the fact that SBC had previously acknowledged the CPUC's jurisdiction over DSL services in SBC's 1998 application for state approval to provide DSL services in California. On November 6, CISPA filed its own motion asserting the CPUC's authority to regulate broadband services.

"SBC's discriminatory practices have all but eliminated competition in the DSL market," said Mike Jackman, executive director of CISPA. "Independent ISPs have been forced to provide DSL to their customers at a loss and SBC now controls more than 90 percent of the market. What's ultimately at stake here is not just competition in broadband access, but whether Internet users will have a choice in the content and applications that will become available in the future."

CISPA and SBC will be back in court on April 25, 2001 to continue their individual complaints.