The Federal Communications Commission is expected to adopt new rules today that will force local telephone companies to share their lines with high-speed Internet access providers, sources with knowledge of the commission's plans said yesterday.
The decision, an attempt to spur competition, is first and foremost a boon for a new crop of companies that specialize in delivering high-speed Internet connections over traditional phone lines, using a technology known as DSL (digital subscriber line). More generally, it amounts to a push for the spread of the latest generation of the Internet--particularly in residential markets--and the promise of new services that require faster flows of computer data.
"Our rules on line sharing will result in greater consumer choices at lower prices for high-speed Internet access," said FCC Chairman William E. Kennard. "Now, small entrepreneurial start-ups will be able to invest in tomorrow's technologies and offer a whole new array of services to the American consumer."
Local telephone companies portray the new rules as unfairly tilted toward their rivals. They spent money to build phone systems, they complain, and now their competitors get to use their lines to take away business of the most lucrative kind--data. Meanwhile, the local companies must continue to provide dial tones for voice calls to anyone who wants one.
"They're basically saying the competitors should be able to skim the cream," said David A. Bolger of the U.S. Telecom Association, which represents local phone companies.
The FCC's action comes as part of its ongoing push to prod the delivery of what are known as "advanced services," including high-speed Internet, to American households. Cable television wires have become a key conduit for high-speed connections. So have telephone lines, but regulators have found a bottleneck there.
Those who want DSL service can already buy it from local telephone companies over the same line that now handles their voice calls. But many companies have been slow to deploy DSL. Competitors such as Covad Communications and Rhythms NetConnections have sought to deploy more aggressively, but they have been stymied by price: Customers who want service from a competitive DSL provider must now buy an additional line from the local phone company, adding about $20 a month to the cost--a major disincentive.
The new FCC rules will force local companies to "split" the line when a customer requests DSL service from a competitor, using one portion to continue handling voice calls and the other for data.
"This will allow competition to develop in residential and rural markets, where otherwise it would have taken significantly longer," said Jonathan Askin, chief legal counsel for the Association for Local Telecommunication Services.
A key question is what competitors will have to pay the local telephone company for the data portion of the line. The answer won't be clear for several months: The FCC was all but certain last night to adopt the new rules, while leaving it to the states to implement them. Still up in the air was whether the commission would hand the states pricing guidelines for determining how much the local companies may charge.
Under the new rules, local companies would be required to negotiate agreements with competitive DSL providers. What happens if the two sides fail to agree was still being debated last night, with state arbitration discussed as one option.
Whatever the price DSL providers must pay, the new rules amount to an enormous advance for competitive providers. They mandate that local companies can't charge them more for the data portion of the phone line than they effectively charge themselves in pricing their own DSL service.
"We expect to be on a level playing field," said Dhruv Khanna, general counsel for Covad Communications, which sells DSL in 23 cities, including Washington.
Other DSL providers said the new rules would allow them to connect customers faster, since they would no longer have to wait for the local company to provide a new line--something they say happens too slowly.
"The only thing standing in our way is the telephone companies," said Jeffrey Blumenfeld, general counsel for Rhythms. "What this affects is that last piece of how they slow us down."