NEW YORK - Today's muddled decision by the Federal Communications Commission on how to regulate local phone networks will likely lead to higher digital subscriber line prices in the short term, better broadband networks in the long term and continued regulatory battles for years to come.
The technology industry desperately wants to quicken the pace of broadband deployment, calling it the single biggest hurdle to their industry's recovery. The Federal Communications Commission (FCC) decision clearly aimed to meet that goal, but did so through a patchwork compromise so complicated that its chairman, Michael Powell, described it as creating "Picasso-esque regulatory backdrop."
Part of the FCC's decision that drew the least notice may have the greatest short-term impact. Today around 40% of high-speed Internet connections running over phone lines rely on an FCC rule known as "line-sharing." Under line-sharing, a higher-frequency "DSL" signal rides alongside a regular low-frequency phone call on an existing phone line, thus "sharing" the same wire. Since this incremental use of a phone line didn't require the phone company to give up its original line or other equipment, monthly line-sharing rates were often set under $10. Such prices were the key to the comebacks of DSL resellers such as Covad Communications (nasdaq: COVD - news - people ).
The commission voted to kill the line-sharing rule, in a decision that flip-flopped the usual political positions. Chairman Powell has generally opposed forcing the Bells to lease any part of their networks, but line-sharing was the major exception. "Line-sharing rides on the old copper infrastructure, not on the new advanced fiber networks that we are attempting to push to deployment," he wrote. "Indeed, the continued availability of line-sharing and the competition that flowed from it likely would have pressured incumbents to deploy more advanced networks."
The line-sharing decision decimated the stock of Covad, the biggest independent DSL provider, driving down its stock 38% today.
Broadband adoption rates in the U.S., where about 20% of households now have the service, have trailed those of many other industrialized countries, including Japan, South Korea and Canada, where prices are lower. Covad Chief Executive Charles Hoffman has warned that any increase in his costs would forestall the price cuts needed to convince more people to sign up.
In its other significant broadband decision, the FCC freed local phone companies to fight toe-to-toe with the less-regulated cable industry by allowing the Bells to keep sole control of new networks they build, as long as the networks contain some fiber optics.
Verizon Communications (nyse: VZ - news - people ), SBC Communications (nyse: SBC - news - people ) and the other Bells have promised that this decision will speed their deployment of new networks deep into America's neighborhoods, since they need no longer fear competitors will become the main beneficiaries of such buildouts. Moving fiber cables closer to more homes will limit the distance signals have to travel over old copper lines, which in turn will lead to faster DSL speeds. Fiber-rich networks could even allow phone companies to offer cost-effective TV programming, injecting additional competition into that market.
That's from forbes.com. |
