ENEMY OF THE STATES

The FCC is considering a new broadband policy that would strip state public utility commissions of their authority to give consumers more choices, better prices and improved services. Ostensibly designed to spur investment in broadband services, the new rules under FCC scrutiny would re-entrench the dominant regional Bell telephone companies, deprive consumers of choices for high-speed data services and rob citizens of protections they now have for voice services. Ironically, the changes would come just as a number of states are creating competitive environments envisioned by the Telecom Act of 1996.

At issue is the degree to which the Bells can restrict access to unbundled network elements that competitors combine with their own resources to provide service to homes and businesses. The FCC is now deciding whether it should parse the rules to allow the Bells to freely choose which elements they will lease to rivals for high-speed services, and at what prices.

If the commission so decides, it will diminish the incentives Bell companies have to innovate in serving customers, encourage them to raise prices and destroy the benefits of competition. The new rules will increase risks for competitors, scare off new capital for broadband infrastructure, suppress innovation and rob investors of their investments in promised competition.

The FCC should instead embrace the states' honored role as public policy laboratories. For example:

• The FCC could give the states significant roles in assessing the need for network elements based on the realities of their markets.

• The states could test ways to enable consumers to switch local phone service as easily as they now choose long-distance providers — the difficulty of changing providers is one of the biggest impediments to telecom competition.

• The states might consider structural changes. Pennsylvania, for example, has considered separating its Bell company into two businesses — one that would sell phone and Internet service, and another that would lease network services to all competitors.

Congress imposed network access requirements for a good reason: It would be unreasonable to ask financial markets to finance an end-to-end competing telecommunications system, the entrepreneurs to build it and marketing channels to sell its services, even on a localized basis. No new competitor could match the facilities assembled over the better part of a century under the government's regulatory protection using ratepayer money. Without such access, new phone service competitors could not exist, no matter how efficient they may be.

DOSSIER HUGH CARTER DONAHUE

Occupation: Communications policy analyst; author, “The Battle to Control Broadcast News”

Location: Philadelphia

Current reading: “The Last Great Frenchman: A Life of General DeGaulle” by Charles Williams

Favorite Web site: www.google.com

Next project: Studies of textile-based display — “I'd like to make a T-shirt that's a television.”