Wall Street unhappy with FCC proposal
August 19, 1998
Network World via NewsEdge Corporation : New York
Wall Street is turning thumbs down on a government
proposal to encourage large local carriers to speed up
their broadband access-lin e deployments.
With the entire stock market reeling, investment
analysts say regional Bell operating companies are
getting no help from a Federal C ommunications
Commission proposal authorizing the creation of
separate data-services subsidiaries that would escape
some traditional telecom regulations.
The Aug. 6 proposal would enable RBOCs to establish
partially deregulated "advanced network subsidiaries"
housing high-speed equipme nt such as digital
subscriber line access multiplexers (DSLAM). Such
equipment terminates new DSL services, which support
data downl oads of 1M bit/sec or greater over traditional
copper links.
The problem, according to securities analysts, is that
the FCC proposal comes with so many strings attached
that the RBOCs are unlik ely to establish subsidiaries to
speed up their slow DSL deployments, even if the
proposal becomes law. The FCC has promised a fina l
ruling by February 1999.
"RBOCs did not gain any ground in the newly proposed
rules," stated PaineWebber telecom analyst Eric
Strumingher in a note after the proposal was issued.
"These proposed rules are one more piece of evidence
that the RBOCs are getting the short end of the stick in
the deregulation of th e telecommunications services
industry," Strumingher added. "The Bells will be unable
to sustain earnings growth and return on inves tment at
the record levels they have enjoyed over the past two
years."
In its proposal, the FCC states that RBOCs could not
use the advanced network subsidiaries to offer
long-distance transport of data services prior to the
RBOCs gaining general long-distance authority. Two
and a half years after enactment of the
Telecommunications Act of 1996, no RBOC has yet
gained regular long-distance approval.
The RBOCs had hoped to win this right because Section
706 of the act directs the FCC to scrap regulations if
they hinder national br oadband network deployment.
The FCC proposal would end the requirement that
RBOCs offer ports on their DSLAMs to competitors, but
would still require them to of fer space in their central
offices to DSL-based competitors.
Wall Street's verdict on the Section 706 proposal comes
at a time when investors are also combing carefully
through the stock and bo nd prospectuses of RBOC
competitors seeking to specialize in DSL and other
broadband technologies.
Since last May, offerings of high-yield bonds for
competitive local exchange carriers have "dried up,"
according to Mark Langner, te lecom research associate
for Hambrecht & Quist, a San Francisco investment
house specializing in IT companies.
A least one of the five FCC commissioners said he was
voting in favor of the proposal because he thought it
would make RBOCs and oth er local carriers happy and
eager to invest in broadband networks.
Republican Commissioner Michael Powell says there
had been an "unfortunate tendency" at the FCC to pass
rules that "depend upon a co mpany or an industry
acting against its self-interest." Powell says he hopes
the new proposal will spur RBOCs to accelerate their br
oadband offerings because doing so will offer some
deregulation of data services.
<<Network World -- 08-17-98, p. 23>>
[Copyright 1998, Network World]
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