FCC Mulls Cutting Bells Slack on Giving Rivals Network Access

The FCC may reduce the RBOCs' obligations to lease network access to rivals.

The telecommunications policy debate between Regional Bell Operating Companies and their rivals is perennial in Washington, but next month, several key aspects of the debate will come to a head.

The Federal Communications Commission, say industry sources, is considering cutting the incumbent telephone carriers some slack on providing network access to rivals—a move those rivals say will stifle competition.

The degree to which the FCC is able to translate its well-documented deregulatory impulse into action will manifest in critical votes slated for the agencys meeting next month. At the heart of the issue is how much of the local network RBOCs must lease to competitors at regulated rates. Congress decided in 1996 that local competition would depend in part on rivals having affordable access to the local network, but FCC Chairman Michael Powell has been vocal in his preference for rivals building their own facilities.

According to industry experts, the FCC is considering reducing RBOCs obligations to lease switching services and transport lines, which are among a list of seven regulated network components. Deregulation proponents, namely RBOCs, say a break from regulators would free them to invest in network upgrades. But critics say such deregulation could sound the death knell for competition, low prices and innovation.

"The threat is pure and simple that we could get the days of the old Bell monopoly back," said Russell Frisby, president of the Competitive Telecommunications Association, in Washington. "We believe that history demonstrates that in a monopoly environment, the Bells are not going to invest in network upgrades."

If the commission does reduce switching or transport obligations, it is likely to do so conditionally, perhaps depending on the state of competition in a given market, sources said.

"This is fluid and much less clear-cut than some people are suggesting and the Bells would like," said David Kaut, an analyst with Legg Mason Wood Walker Inc.s telecom group, in Washington. "I think that what ultimately comes out of the FCC will favor the Bells. They are going to make gains. The question is, will it be 20 percent, 30 percent, or 40 percent or more?"

It is not only the dueling interests of RBOCs and their rivals that the FCC must negotiate but also the interests of state regulators, who enjoy a long history in the local telephone markets and guard it zealously. If the commission were to pre-empt or significantly shackle their authority, the states would most likely appeal it in court, analysts said.

"We understand our obligation to continue to sell last-mile [connections] at a regulated price. But where there is a competitive alternative available, I should be obliged to sell below cost," said Herschel Abbott, vice president for governmental affairs at BellSouth Corp., in Washington.