WASHINGTON - In an effort to spread deployment of high-speed Internet service to residential and small business customers, the Federal Communications Commission this week adopted new rules to require local telephone companies to split their lines with competitors at cost.
The ruling, which will most likely be challenged in court by the local telephone companies, stands to benefit a host of new companies specializing in delivering high-speed data services via telephone lines. These startups greeted the news as "a monumental, even landmark" ruling that will enable them to bring broadband to the masses.
The order means that customers will be able to order telephone service from one provider and broadband Internet service from another without installing a new telephone line. Currently, competitors must pay the local telephone companies about $20 per month to lease a second telephone line to provide those data services, an amount they say prices them out of the consumer market. The local telephone companies already split the existing line when customers order phone and data service from them.
"The ruling is the biggest thing to happen to broadband since the Telecom Act," said Michael Olsen, deputy general counsel of NorthPoint Communications, a data provider with more than 12,000 high-speed Internet subscribers, most of which are businesses.
"It's a monumental, even landmark regulatory decision," said Frank Paganelli, assistant general counsel for another competitor, Rhythms NetConnections. Rhythms has 6,700 - primarily corporate - subscribers.
"It levels the playing field," added Dhruv Khanna, general counsel for Covad Communicatons, which has 31,000 lines installed.
Local telephone companies recently have been aggressive in rolling out broadband service over telephone lines, a technology known as digital subscriber lines or DSL. These companies are able to price their services at around $40 per month to residential and small business consumers because, competitors say, they split the copper lines running to every home and business. The split allows the companies to run voice and data services over a single line.
An organization that represents the local telephone companies, the United States Telephone Association, issued a statement charging the FCC with "government-mandated market manipulation." USTA Chairman Roy Neel said in a statement that the decision comes close to "the nationalization" of local telephone networks and charged that the commission was being unfair in adding regulation to telephone providers while turning the other way on cable television companies.
"Compare the possible approach the commission takes toward the cable industry in its deployment of broadband services to the FCC's heavy-handed and invasive action by demanding the sharing of the local loop," Neel said.
Analysts predicted that the ruling would wind up in court. FCC officials said they believe they have the right to make the ruling following a recent U.S. Supreme Court decision, which allows the agency to spell out which elements of the local telephone network must be "unbundled" for competitors. "I don't think the impact is going to be felt immediately," said Scott Cleland, managing director of the Legg Mason Precursor Group, who believes litigation will soon follow. "I don't see anything happening for between six to 18 months."
In an effort to speed enactment, the FCC in its ruling provided guidelines to state public-utility commissions. State PUCs will ultimately decide on an individual basis the price that local telephone companies can charge to competitors for sharing lines. The FCC encouraged the state PUCs to take shortcuts to implement prices if competitors request arbitration with local telephone monopolies.
Members of the commission said they believed the ruling would spur deployment of high-speed Internet services to more American consumers. "This will provide more choice and flexibility for consumers," FCC Chairman William Kennard said at the regulatory agency's meeting today. "Most importantly, line sharing will bring advanced Internet services into the home more efficiently and as quickly as possible."
For more in-depth coverage of the Internet Economy, visit The Industry Standard, a sister publication to Network World. Copyright 1999 The Industry Standard. All rights reserved.
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