FCC proposes rule to help boost phone competition

May 10, 1991|By Edmund L. Andrews | Edmund L. Andrews,New York Times News Service

WASHINGTON -- In a move that could greatly increase competition for many local telephone companies, the Federal Communications Commission proposed a rule yesterday that would force them to let rivals plug directly into local telephone systems.

The proposal, which officials hope will be adopted within 12 months, will be a big help for the growing number of operators of high-speed fiber optics lines that bypass the traditional telephone system.

These companies allow customers to reach their long-distance carriers at prices considerably lower than the access charges imposed by local telephone companies. Access charges account for about 40 percent of the cost of long-distance service.

Over the long term, the measure represents an important step in chipping away at the near-total domination of traditional telephone companies in their local markets. Large corporations have begun to consider the newer services in developing local private networks to link offices.

FCC officials said they considered the measure a priority, although many issues remained unresolved, particularly those concerning rates that telephone companies would charge for making connections.

The heart of yesterday's proposal is a requirement that telephone companies with revenues greater than $100 million a year let the aspiring rivals set up switching equipment on or very near their premises.

This will cover most local phone companies that serve mid-size and large cities. At the moment, bypass companies account for less than 1 percent of the local telephone market.

The measure will mean that a fiber optics company can run lines directly to the neighborhood switching stations and then use the telephone company lines to reach individual customers.

Under the proposal, the telephone companies will have to offer special rates that reflect the narrowed use. As a practical matter, the change will make it economically feasible for the bypass companies to penetrate much more deeply into local markets than they can now.

At the moment, these rivals serve only customers who are connected directly to their fiber optics lines. These lines are analogous to super-highways: They are excellent for relaying heavy volumes of traffic along a busy corridor, but they do not offer the equivalent of backroads that reach throughout a community.

Yesterday's proposal will address this "last mile" problem by allowing new providers to run high-speed lines to the telephone company's neighborhood substations scattered around a city.

Customers will use the telephone company only for a tiny segment of their service and use the bypass company for the rest of the service.

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