FCC continues its fostering of re-monopolizat ion of Telecom

[David Farber <dave () farber net>]

_______________ Forward Header _______________
Subject:        Bush's FCC continues its fostering of re-monopolization of Telecom
Author: "Robert J. Berger" <rberger () ibd com>
Date:           16th December 2004 12:37:12 am

Big Bells Allowed to Charge Rivals More for Line Access

By STEPHEN LABATON December 16, 2004

http://www.nytimes.com/2004/12/16/technology/16rates.html?oref=login

WASHINGTON, Dec. 15 - Telephone executives and industry analysts
predicted a sharp rise in local phone rates over the next year
after a bitterly divided Federal Communications Commission voted
Wednesday to relax rules that had required the four large Bell
telephone companies to give their rivals access to their
networks at sharply discounted wholesale prices.

The decision, approved by the commission's three Republican
members over the dissents of its two Democrats, was an important
victory for the Bell companies, and another in a series of
regulatory and legal setbacks for rivals like AT&T, MCI and a
group of smaller competitors.

But the order did not go as far as the Bell companies had
hoped. In particular, it preserved some discounted wholesale
rates covering high-capacity lines that are used primarily by
businesses. The Bells said that they would go back to a federal
appeals court next month seeking to get even more of the rules
repealed.

Still, analysts and industry executives predicted that the
decision would lead to significantly higher phone rates over the
next year in many markets. The exact increases are not yet
known, although Bell executives have indicated that they expect
to raise wholesale rates for the use of pieces of their networks
by 30 to 50 percent.

How much of that percentage increase would directly transfer to
business and consumer phone bills is hard to predict, but
analysts said that billions of dollars are at stake. And the
critics of the Bells say that if the companies succeed in
driving up the prices of their competitors, the Bell companies
would have more room to raise their own rates.

But Bell executives said that while the changes will give them
the freedom to raise wholesale rates, they still face
significant price competition in providing service to customers,
particularly from the cable industry, which has been moving more
heavily into offering telephone service. The Bell companies, in
order of size, are Verizon, SBC Communications, BellSouth and
Qwest.

The commission also approved rules that it said would lead to
wider availability of high-speed Internet connections on
airlines. And it adopted a measure to begin studying whether to
remove the ban on the use of cellphones in planes.

Critics of the commission's order on wholesale phone rates
predicted that it would drive most of the few remaining
competitors of the Bell companies out of the local phone
business.

Earlier changes in the same set of rules were cited by AT&T
executives for their decision to leave the residential phone
market earlier this year. On Wednesday afternoon, AT&T said its
initial analysis of the commission's order had concluded that
the changes would deny Bell rivals access to up to 20 percent of
all business lines in the top 50 markets.

The architect of the revisions, Michael K. Powell, the
commission chairman, said that the changes were driven by
increasing competition in phone markets since Congress imposed
the obligations on the Bell companies in 1996 and by a series of
federal court decisions in cases brought by the Bell companies
that had questioned the earlier, tougher rules.

The Bush administration, siding with the Bell companies, decided
last summer not to take to the Supreme Court a decision by the
federal appeals court here ordering the commission to reconsider
the rules.

Mr. Powell, who has long been critical of the regulations, said
that the rule changes adopted on Wednesday attempted to balance
competing interests and withstand further scrutiny from the
courts. "Today's decision crafts a clear, workable set of rules
that preserves access to the incumbent's network where there is,
or likely will be, no other viable way to compete," Mr. Powell
said. He also acknowledged that the balanced approach he had
undertaken would please neither the incumbent phone companies
nor their competitors.

"One will undoubtedly hear the tortured hand-wringing by
incumbents that they are wrongly being forced to subsidize their
competitors," he said. "Conversely, one can expect to hear dire
predictions of competition's demise from those who wanted more
from this item. Time will show this will not be so."

But the agency's two Democrats, as well as consumer groups, said
that the decision would effectively dismantle the main
provisions of the Telecommunications Act of 1996. That law
required the Bells to lease their equipment to rivals in an
effort to promote competition.

The Democrats and the consumer groups predicted that as a result
of Wednesday's order, both residential and business rates would
begin to rise significantly over the next year.

"This order throws a cold bucket of water on the few hardy
remaining embers of competition," said Jonathan S. Adelstein,
one of the two Democratic commissioners who
dissented. "Regrettably, and unnecessarily, the commission's
action will ratchet up rates for both residential consumers and
small businesses."

The other Democrat, Michael J. Copps, said that the decision
"effectively dismantles wireline competition."

Mr. Copps predicted that as a result of the decision many other
companies would follow AT&T out of the residential phone
business. "Down the road consumers will face less competition,
higher rates and fewer service choices."

The Bell companies applauded the repeal of some of the price
restrictions but said that the agency had not gone far enough in
taking down other price restraints and vowed to take the matter
back to a federal appeals court here that has continued to
oversee the overhaul of the regulations.

"The F.C.C. has adopted an order that is headed for yet another
judicial rebuke," said James C. Smith, a senior vice president
at SBC Communications.


--
Robert J. Berger - Internet Bandwidth Development, LLC.
Voice: 408-882-4755 eFax: +1-408-490-2868
http://www.ibd.com



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