Phone Carriers Want FCC To Deregulate Data Services
Friday July 31 10:10 AM EDT
By Aaron Pressman
WASHINGTON (Reuters) - Local telephone carriers are unhappy with proposals floated by
federal regulators to remove only some restrictions on the companies' Internet and data service
offerings, the head of the U.S. Telephone Association said.
Officials at the Federal Communications Commission have hinted recently that they are likely to
lift some of the 1996 Telecommunication Act's restrictions on high-speed data networks the
"Baby Bell" companies plan to build.
Under the act, the Bells are forbidden from offering long- distance and data services within their
local regions until they open their local telephone networks to competitors.
The Bells argue that the demand for data networks, from increasingly wired businesses and the
vast growth of the Internet, is exceeding the capacity of existing providers. Without regulatory
relief, the companies say they cannot afford to build new systems and relieve the strain.
Roy Neel, president of the telephone association, said a plan suggested by some FCC officials
requiring the Bells to establish separate subsidiaries for new data networks was burdensome and
unnecessary.
"In an open and competitive marketplace there's no need for the government to mandate separate
subsidiary activity," Neel said at a news conference. "If the marketplace is open, it should be up
to the company providing service to determine how it organizes its business." Next week, the
FCC will release proposed rules that are expected to allow the Bells to set up data networks in
separate subsidiaries free from price regulation and mandatory discounted leasing of data services
to other carriers.
But the commission is not expected to grant the Bells' formal requests to broadly lift restrictions
on in-region data networks. The agency may provide a waiver, however, for data networks
serving isolated, rural areas where new competitors are unlikely to begin providing service.
While that may not satisfy the companies, some regulatory relief is better than none and the FCC
rules should still spur the deployment of data networks, according to industry analyst Scott
Cleland at the Legg Mason Precursor Group.
"The FCC's proposed rules will greatly accelerate high- speed deployment, but the question is at
what rate," Cleland said. "It's certainly a massive improvement, but the rules are going to be
incomplete and not fully satisfying."
SBC Communications, Ameritech, Bell Atlantic and US West have asked the commission, under
a provision of the 1996 law promoting the development of high-speed data networks, to waive
the in-region data restrictions on new systems they plan to build.
The companies also asked that the systems be exempt from a provision of the law requiring them
to lease parts of their networks to competitors at a discount.
Smaller phone companies that compete with the Bells and long-distance companies like AT&T
and MCI Communications oppose the data network waivers because, they argue, the Bells have
not opened their existing networks to competitors.
FCC Chairman William Kennard said last month that if local carriers opened their networks so
competitors could connect equipment providing high-speed data services, the FCC would not
need to require mandatory leasing or price regulation.
The Clinton administration's National Telecommunications and Information Administration told
the FCC in a letter last week that while it opposed broad deregulation, it favored the separate
subsidiary approach.
Neel criticized the separate subsidiary requirement as counter to the will of Congress as
expressed in the 1996 telecommunications law.
"This is just one more example of the commission seemingly determined to keep a stranglehold on
these companies," Neel said. "The FCC seems unwilling to get with the spirit of the 1996 act
which was deregulation, not more regulation."
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