Telecom Providers are Embroiled in a Desperate Battle For the Last Mile.

The policy battle over the "last mile"-the lines that connect telecom services to homes and businesses-has become particularly intense in recent months.

The policy battle over the "last mile"—the lines that connect telecom services to homes and businesses—has become particularly intense in recent months.

Competitive local exchange carriers (CLEC) say their incumbent counterparts (the former Baby Bells) are hampering efforts to provide broadband services. They say the incumbent local exchange carriers are flouting the federal Telecom Act of 1996, which requires those carriers to open their local loops. Some telecom providers say the incumbents charge unreasonable prices and create service delays.

CLECs are pursuing a policy called "structural separation," which would require incumbent carriers to create separate retail and wholesale operations. That concept would make a carriers retail unit line up alongside other CLECs to purchase services from the carriers wholesale operation. Proponents contend that would create an even playing field.

A number of states have been petitioned to require structural separation or have seen bills floated. In February, Access Integrated Networks, a Macon, Ga., telecom provider, asked nine Southeastern states to compel Bell South to create separate retail and wholesale operations. Also in February, two structural separation bills were introduced in the Illinois legislature, in the heart of Ameritech country. A similar bill in the Maryland legislature was recently withdrawn, but lawmakers will study the issue this summer. Legislators in Colorado and Wisconsin have expressed interest in structural separation, as well.

AT&T, a company with local-phone aims of its own, also is pursuing structural separation. The company filed a petition in Florida last month and also has asked public service commissions in Virginia and New Jersey to require structural separation.

"We do believe this is an issue whose time has come," says Russell Frisby, president of the Competitive Telecommunications Association, which represents CLECs and long-distance carriers, among others.

So far, Pennsylvania has come the closest to requiring structural separation. The states public service commission in March ordered Verizon to pursue "functional" separation as an interim step that may lead to a stricter structural separation.

The Baby Bells, meanwhile, resist structural separation as expensive and inefficient. "Splitting Verizon in two would result in higher phone costs, slower deployment of the latest technology for data and Internet access and, worst of all, increased confusion for customers," says Robert Woltz, president of Verizon Virginia.

But its not just the Baby Bells who are objecting. Representatives from five think tanks—including The Cato Institute and George Mason Universitys Mercatus Center—stated their case in a letter to Congress. Under structural separation, they argue, the carriers wholesale units would run the local loop as regulated monopolies, making services available at a government-regulated price. Referring to CLECs, the letter states: "The fact that some firms are performing poorly in the marketplace—despite numerous regulatory advantages—is hardly cause for returning to the failed model of regulated monopoly."

Does structural separation boost competition or promote monopoly? You make the call.