To All:
ORCTF did not respond with much gusto to this announcement: Thursday, Aug 6 1998 2:44PM ET
Baby Bell Data Networks Cleared by U.S. Regulators
Washington, Aug. 6 (Bloomberg) -- Federal regulators approved a plan designed to promote advanced telecommunications services by clearing the regulatory path for the largest U.S. telephone companies to build high-speed data networks.
The U.S. Federal Communications Commission's proposal would allow the Bells -- Bell Atlantic Corp., Ameritech Corp., US West Inc. SBC Communications Corp., and BellSouth Corp. -- and GTE Corp. to build high-speed data networks in their regions without requiring them to sell that service to competitors at a steep discount -- a requirement which discourages investment in the new technology.
''This is vitally important to our country,'' said FCC Chairman William Kennard. ''By opening up and unleashing the power of these high-capacity networks to promote (electronic) commerce, we are going to improve the lives of American consumers in this country.''
About $20 billion a year is spent on electronic commerce, and that figure is expected to grow to $350 billion in four years, Kennard said. The FCC's plan, which likely won't final until the end of the year, is designed to hasten that progress by promoting the development of high-speed Internet connections to U.S. homes and small businesses.
Untapped Market
''This is an untapped market where nothing's occurring right now because of regulatory disincentives,'' said Scott Cleland, managing director of Legg Mason Inc.'s Precursor Group. Nearly all U.S. households are without high-speed Internet connections today, though more than 20 million Americans have regular Internet hook-ups to their homes, he said. ''It's a multibillion- dollar potential market, which would grow much faster than the average market,'' said Cleland.
The FCC proposal, if it becomes final, would be only a partial victory for those Baby Bells that want to build high- speed Internet pipelines into customers' homes.
Under the plan, the Bells offering the service through a separate affiliate wouldn't have to sell their data services to competitors at a steep discount, which they said would discourage investment in the technology. The Baby Bells and GTE are required to resell their phone service to competitors at a discount. They'd also be freed from the rate regulations which apply to their phone networks.
However, the commission said the Bells wouldn't receive a blanket exemption from restrictions that keep them from offering telecommunications services over long-distances until they open their local markets to potential competitors. The agency left open the question of whether the phone companies should be allowed to send data traffic over long distance in areas where few carriers are interested in competing, such as rural areas.
'Digital Monopolies'
AT&T Corp., MCI Communications Corp. and other competitors have said that easing the long distance restrictions on data networks would kill competition in the new market for advanced telecommunications services. Completely lifting these restrictions would ''create an environment that would lead to unregulated digital monopolies,'' said Jonathan Sallet, MCI's chief policy counsel.
Giving the Bells the ability to sell long-distance services over data networks ''would deflate the urgency to open their local markets and get into traditional long-distance markets,'' said Jeffrey Kagan, president of market researcher Kagan Telecom Associates. The 1996 Telecommunications Act requires the Baby Bells to open their local markets to competition before they can offer long distance service. So far, none have fulfilled that requirement.
The telecommunications act also requires the FCC to take steps to promote advanced telecommunications services by Aug. 8.
FCC members are ''trying to do two things. They want to encourage incumbent carriers to deploy high-speed access'' said Paul Glenchur, an analyst with Charles Schwab & Co.'s Washington Research Group. ''The other goal is just as important: To enable multiple competitors to offer these services.''
14:31:27 08/06/1998
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