FCC Frees Bells of Broadband Restrictions

The regional Bell operating companies won one and lost one Thursday afternoon as the Federal Communications Commission (FCC) made sweeping, dramatic changes in its local phone and broadband competition rules. A sharply divided FCC ruled the Bells will no longer have to share their high-speed fiber lines with broadband competitors but also decided the Bells would have to continue to share their local voice copper lines.

The FCC’s broadband ruling provides the Bells with substantial “unbundling” relief for lines utilizing fiber facilities, including no unbundling requirements for fiber-to-the-home loops or hybrid loops that utilize both fiber and cooper. The Commission also eliminated “line sharing” from unbundling requirements.

The decision represents a significant victory for Commissioner Kevin Martin, who opposed Chairman Michael Powell’s plan to free the Bells from their current local competition legal obligations under the 1996 Telecommunications Act. Currently, the Bells must lease some or all elements of their networks, including broadband lines, to competitors at deep discounts to foster competition in the local phone service market.

The Bells argue the local competition regulations have put them at a competitive disadvantage with cable companies that are not required to share their lines with rivals. They also contend the current rules have stymied investment in new fiber networks and have given the cable companies an unfair advantage in rolling our broadband service. Cable companies currently control almost 70 percent of the U.S. broadband market.

Bell competitors countered that rolling back the rules would effectively give the Bells a monopoly over high-speed broadband services delivered over telephone lines.

Powell wanted to eliminate both the local service and broadband competition requirements on the Bells, a position also favored by fellow Republican Kathleen Abernathy. But Martin, also a Republican, denied Powell a majority on the five-person FCC when he convinced Democrats Michael Copps and Jonathan Adelstein to support his plan to give the state public utility commissions the power to make deregulatory decisions about the Bells’ local service requirements.

In a late Wednesday night compromise the feuding commissioners agreed to “split the baby” with Powell and Abernathy relenting on the local competition rules and Martin, Copps and Adelstein agreeing to support rules allowing the Bells to block competitors from using their high-speed lines.

“I support this item because it achieves a principled, balanced approach,” Martin said. “It ensures we have competition and deregulation. We deregulate broadband, making it easier for companies to invest in new equipment and deploy the high-speed services that consumers desire.”

Martin added, “We preserve existing competition for local service — the competition that has enabled millions of consumers to benefit from lower telephone rates.”

House Energy and Commerce Committee Chairman Billy Tauzin (R-La.), who failed last year to legislatively accomplish what Powell attempted to do on the regulatory level, called Martin a “renegade” Republican who led a “palace coup” that “breathed new life into the dying era of big government control over U.S. telecommunications policy.”

Tauzin said the FCC decision, “again points out the urgent need for Congress to enact new legislation designed to promote real — not phony — competition in the marketplace. Given the FCC’s lack of leadership, I am now prepared to immediately begin that debate.”

The Information Technology Association of America (ITAA) was one of the first groups to criticize the FCC’s broadband decision.

“A competitive ISP market has helped transform the Internet into a powerful communications and technology tool for both individuals and organizations, stimulating small business development and benefiting the entire economy,” said ITAA President Harris Miller. “The Commission today rejected preserving meaningful choices for ISPs among wholesale mass-market broadband telecommunications service providers, and thereby killed consumers’ chances to continue to enjoy the significant benefits of today’s competitive broadband information services market.”

AT&T, one of the principal winners of the local competition decision and one of the primary supporters of the ubiquitous television “Voices for Choices” campaign, hailed the FCC’s decision.

“The FCC decision supports the actions of the states to open the local service market to competition, and we remain committed to bringing competitive choice to as many customers as possible,” said Jim Byrnes, AT&T’s VP of business public relations. “By leasing facilities initially, we bring competition to market that much sooner. Today’s decision on switching therefore is a great win for our customers.”

Byrnes added, however, “At the same time, we will look carefully at the order’s provisions affecting the offering of DSL service over fiber loops. While this will have limited impact immediately, we will take appropriate steps to ensure that our customers will continue to enjoy the benefits of advanced technologies in the future.”

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