Carriers filet FCC proposal to RBOCs

By David Rohde
Network World, 10/12/98

Washington, D.C. - Major carriers have flooded the Federal Communications Commission with written comments voicing opposition to the FCC proposal to partially deregulate the Bell companies' data services.

If the FCC hopes to salvage the proposal, known as the Section 706 proceeding, it has its work cut out for it. The FCC will have to determine whether to toughen the proposal, as the long-haul carriers are demanding, or strip the proposal of its remaining restrictions, as the regional Bell operating companies are asking.

At issue is the FCC recommendation to let the RBOCs sell digital subscriber line (DSL) and other advanced data services without having to meet current requirements to resell these offerings to competitors. The catch: RBOCs will have to offer the services through separate subsidiaries. The FCC's goal is to speed up DSL deployment.

When the FCC issued the proposal in early August, carriers on all sides began grumbling that the proposal would not achieve its aim (NW, Aug. 10, page 1). Now, in its official comment letter, Bell Atlantic is complaining that the FCC is actually blocking deployment of services that would remove the last-mile barrier to faster Internet and IP applications.

"This proceeding presents a once-in-a-lifetime opportunity to promote the future health and competitiveness of the Internet," Bell Atlantic officials say in the filing. "The way to do so is by fulfilling Congress' directive to remove regulatory barriers to investment and the deployment of advanced services. Yet the proposal here would do the opposite."

Among Bell Atlantic's beefs: The separate-subsidiary proposal does nothing to let Bell Atlantic offer data services across local access and transport area boundaries, puts new accounting rules on the separate subsidiaries that increase the RBOC's regulatory burden, and tightens resale and unbundling rules for RBOCs that do not choose the separate subsidiary.

"The current proposal merely would replace one set of regulatory barriers with another," Bell Atlantic says. "It does nothing to promote the deployment of advanced services."

For its part, AT&T complains that RBOCs that do adopt a separate subsidiary could abuse their new freedom and offer unfavorable terms to competitors that need to lease local loops and central office space. AT&T says the FCC should add rules to its separate-subsidiary proposal to require the subsidiary to include minority ownership from outside the RBOC and should impose other restrictions.

Some Washington, D.C. observers say AT&T and others missed the point of telecom reform - they think the FCC should just deregulate services, even if it runs the risk of powerful companies leveraging their market position.

"It's time to stop the spread of regulation to the Web and the rest of the Internet," says Jeffrey Eisenach, president of think tank Progress & Freedom Foundation. PFF told the FCC that xDSL, cable modem and related services should be entirely exempt from "telephony-style regulation."

The Ad Hoc Telecommunications Users Committee filed comments saying that giving RBOCs the choice between a separate subsidiary or having to offer services for resale makes sense. But committee attorney James Blaszak says RBOCs shouldn't be given data deregulation immediately because they have failed to roll out DSL lines for fear of cannibalizing their higher cost T-1s (see graphic).

A group of equipment and software companies called the Internet Access Coalition largely supports the FCC's proposal, and suggests that RBOCs that open up their local networks should be rewarded with more authority to cross LATA boundaries and gain other privileges.

But several more rounds of lobbying are expected before the FCC makes a final decision. A final ruling is due by February 1999.