Bill would spell relief for RBOCs: CLECs claim it's anti-competitive

Legislation sponsored by two influential members of Congress would give the RBOCs long-sought legal relief and a competitive edge in the data services market.

RBOCs praised the bill, which would make it easier for them to build advanced data networks and sell high-speed Internet access, video and other services. The bill will "clear away the regulatory roadblocks and lift the gateway for vigorous competition on the information superhighway," said Tom Tauke, Bell Atlantic's senior vice president for government relations.

But a coalition of competitive local exchange carriers, long-distance companies and ISPs denounced the Internet Freedom and Broadband Deployment Act, saying that it would rewrite the Telecommunications Act of 1996 to give RBOCs an unfair advantage in the data services market.

The bill, introduced July 1 by Reps. Billy Tauzin, R-La., chairman of the House telecommunications subcommittee, and John D. Dingell, D-Mich., ranking Democrat on the House Commerce Committee, would exempt RBOCs' broadband services from two key requirements: obtaining FCC approval before selling long-distance in their territories and reselling and unbundling network elements to rivals.

The argument boils down to whether regulators should treat voice and data services differently. The FCC says the Telecom Act makes no distinction. Supporters of the Tauzin/Dingell bill agree and say a correction is needed.

"When the Telecommunications Act was written, there were only two cursory mentions of the Internet. It wasn't considered a groundbreaking part of the industry," said a Tauzin spokesman.

But the Tauzin/Dingell bill seeks such major changes that it may encounter roadblocks, said Paul Glenchur, an analyst for The Schwab Washington Research Group. "There's a question as to whether [House Commerce Committee Chairman Thomas J.] Bliley, [R-Va.], supports efforts to rewrite parts of the Telecom Act. He's indicated he's not real supportive of that," he said.

The debate has a business component and a legal side. The RBOCs complain that regulations forcing them to share data elements with CLECs and interexchange carriers (IXCs) at low cost inhibit their investment in broadband networks. CLECs and IXCs claim that their spending would be dampened if RBOCs are let out of current rules.

"The way to incent [RBOCs] is to uphold the law," said a spokesman for the Association for Local Telecommunications Services, which represents CLECs.

For all their bellyaching, the RBOCs aren't standing by idly. They and CLECs are rolling out DSL, while cable operators push cable modems. The players are responding to the demand, mostly from residential and small business users, for high-speed Internet access.

Originally developed in the 1980s for video, asymmetrical DSL (ADSL) is only now taking off because of the Internet's popularity, said David Eiswert, director of ISP research at The Strategis Group. "The Internet is the killer app for ADSL. It gave ADSL life."

Bell Atlantic, for example, sells DSL in six markets now, including Boston, northern New Jersey, New York, Philadelphia, Pittsburgh, and Washington, for $39.95 a month. By the end of the year, it expects to have DSL available to 17 million of its 43 million total residential and business lines, said a company spokesman.

BellSouth has deployed ADSL in 27 of 30 southeastern markets that it plans to be in by the end of the year. Its $49.95 a month offering was available in seven markets last September. Charges exclude the costs of monthly telephone service and one-time installation.

No RBOC would disclose the number of DSL customers it has. The Strategis Group projects about 200,000 U.S. subscribers by Dec. 31. The number will grow as DSL's cost - which still is significantly higher than regular dial-up access - falls, Eiswert said.

"This is a technology in its infancy," added Char Haidley, an analyst with New Paradigm Resources Group. "It has to have time for people to find out about it."

In the meantime, the FCC's proposal to let the RBOCs sell advanced data services through separate subsidiaries is up in the air. First, it will resolve the issue of which network elements incumbent carriers must unbundle for competitors.