washpost: in defeat for Powell, FCC will vote to retain Bell sharing

[Dave Farber <dave () farber net>]

http://www.washingtonpost.com/wp-dyn/articles/A32483-2003Feb19.html

The Federal Communications Commission plans to vote today to uphold a strong
role for states to regulate local telephone service, sources said yesterday,
a system that has led to recent price wars between the major regional phone
giants and their rivals.

The vote would be a defeat for the more deregulatory agenda of FCC Chairman
Michael K. Powell, and for the former Bell local telephone monopolies that
lobbied the FCC relentlessly during the past year to abandon rules that
require them to lease their networks to rivals at discounted rates set by
the states. 

AT&T Corp., WorldCom Inc. and other companies have taken advantage of the
rules to sell local phone service to more than 10 million customers
nationwide. By bundling local and long-distance services into aggressively
priced packages, they have forced the Bells to drop prices in some states.

Powell delayed the vote for a week but failed to gain support for his plan
to assert broad federal authority over the leasing system -- a system he has
said should force competitors to build their own facilities.

Powell has sought to overhaul the agency's rules according to his vision of
how to increase competition for telephone and Internet services in a
fast-changing digital world. The FCC also was forced to reexamine its
leasing rules after they were rejected by a federal court, which said the
agency had not adequately demonstrated that they were fair.

It is unusual for a chairman to vote in the minority at the five-member FCC,
but Powell ran into trouble when fellow Republican commissioner Kevin J.
Martin joined with the agency's two Democrats on the issue. State utility
regulators, as well as the Bells' competitors, lobbied strongly to maintain
active state involvement.

The regulators have proposed modifications to the current system, which took
effect in 1996 when Congress mandated that the Bells' monopoly phone
networks be opened to competition.

The states' proposal, which sources said is a blueprint for what Martin and
the Democrats have embraced, establishes some national guidelines for how
business and consumer rates are set without compromising individual state
authority. 

Relations between Martin and Powell are said to be tense, with the two men
hardly on speaking terms. There is still a chance that a last-minute
compromise could be reached that avoids a split vote, but sources said it is
unlikely. Powell's sole supporter on the issue is Commissioner Kathleen Q.
Abernathy, a former local-phone-company lobbyist.

The Los Angeles Times reported yesterday that Powell has prepared a dissent.
Sources close to Powell said he crafted the opinion with an eye toward a
court review of the decision that is almost certain to follow in the coming
year. Depending on how the new rules are crafted, Powell thinks it likely
that the U.S. Court of Appeals for the District of Columbia will overturn
them, sources said.

Powell's supporters note that the last time an FCC chairman voted in the
minority on a major decision, the outcome was later overturned by the
courts. That 1991 decision allowed television networks to own, in a limited
way, shows that aired during prime time. Alfred C. Sikes, who was chairman
at the time, opposed the decision and wanted to eliminate the rule
completely. Ultimately, Sikes was vindicated when a federal court in Los
Angeles threw out the rules.

The decision on the local telephone networks has overshadowed a second key
vote, which is expected to relax rules requiring the local telephone
companies to open their networks to rival providers of high-speed Internet
services. 

Intense negotiations between the commissioners were continuing last night,
but sources expect Powell and other commissioners to forge a compromise.

The Bells have sought freedom from requirements that they share their
networks if they upgrade their lines with ultra-high-speed fiber-optic
cable. 

Sources said the Bells will have no such requirements if they extend fiber
to newly constructed housing developments that do not have existing copper
phone lines. 

In existing service areas, the Bells would only have to offer competitors
access to fiber lines sufficient to provide Internet access at speeds
allowed by copper. 

Fiber offers speeds as much as 100 times as fast as copper.


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