FCC's Powell might seek to alter reform

Bell companies want end to rivals' access to system

Reversal could come Thursday

1996 act gives startups discounted use of lines

February 09, 2003|By Andrew Ratner | Andrew Ratner,SUN STAFF

If the Federal Communications Commission moves this week to end a key part of phone deregulation - a prospect cheered by the regional Bell companies and feared by their competitors - the scene in the commission's cramped corridor will illustrate why the government's 1996 plan to transform telecommunications was outdated almost as soon as the ink dried.

After Thursday's meeting of the commission, lobbyists, phone executives and reporters will flip open cell phones and hand-held computers to report the result back to their offices. The FCC will transmit its decision around the world by high-speed Internet. A landline phone to communicate whatever occurs will hardly be seen.

This scene wasn't envisioned - not to this extent - when President Bill Clinton, seven years ago to the day yesterday, signed the 1996 Telecommunications Reform Act.

Though the act runs 128 pages, the word "Internet" appears only a few times. Cyberspace and cell phones were employed in 1996, but only for a relative few who could afford them or were daring enough to try. Neither Congress, the FCC nor phone executives themselves understood how rapidly wireless and Internet communications would bite into the traditional phone pie.

The deregulation tower turned out to have been built on technological quicksand.

"We didn't foresee this," said James H. Quello, a 23-year member of the FCC who served as its chairman in 1993 before retiring. He said a grandson in New York has called him for months for free over an Internet phone - a development he couldn't fathom when formulating deregulation into the mid-1990s.

"Hell, I'm talking 1993 and broadband hadn't developed and wireless hadn't developed this much," said Quello, now a consultant with the Washington law firm Wiley, Fein and Fielding.

This Thursday, eight days after his father laid out a case against Iraq at the United Nations, Michael K. Powell, the FCC chairman, may also attempt to make a daunting argument that unforeseen upheaval in the phone industry demands a change in telephone reform.

The commission is reconsidering its requirement that the nation's four large local phone companies that evolved from the Bell monopoly - Verizon Corp., SBC Communications Corp., BellSouth Corp. and Qwest Communications International Inc. - must cheaply lease their networks to other phone providers to foster competition.

The non-Bells, from long-distance giants AT&T Corp. and Sprint Corp. to tiny companies with a few dozen employees, say they could not afford to sell local phone service unless they can continue to piggyback on the Bells.

The Bells are required to lease to them their system known in technical jargon as the Unbundled Network Element Platform or UNE-P. Some in the industry refer to it more succinctly as a "phone company in a box."

Government officials concluded years ago that it would be unfair and unrealistic to expect a phone company, even a large one, to be able to rebuild a phone network as extensive as Ma Bell had done over decades in what came to be called an illegal monopoly.

But after seven years and hundreds of billions in telecommunications investment, the Bells still retain a commanding hold on the local phone market. The Bells also have won permission in dozens of states - and Maryland may be one of the next - to sell long-distance service, too.

Many who follow the phone industry contend that it is headed back to a Bell monopoly - a 21st century version - a generation after U.S. District Judge Harold H. Greene broke apart the $150 billion company.

Although it's uncertain what Powell will propose, he's already publicly criticized the current arrangement. The Bells shouldn't have to "eat vegetables" with UNE-P in order to "get dessert" - the right to enter the long-distance market, he has said.

It's considered unlikely, though, that Powell has at least two of the four other commissioners on his side, which he would need for a majority vote.

Even if he does, a major change would assuredly be appealed in federal courts that have sent the FCC back to the drawing board so many times before as to have worn a path on 12th Street. Also, the Supreme Court upheld the UNE-P provision last spring.

Some in the industry believe that Powell may try a "Santa Claus" approach and offer something to all parties: Preserve UNE-P, with the states taking greater control of the cost review, and simultaneously relieve the Bells from having to share their broadband Internet network with competitors.

The Bells have complained that the 1996 act discourages them from investing in high-speed Internet services because it forces them to give away any gains to competitors. The cable TV companies that also provide Internet service, such as Comcast Corp., are not regulated by the telephone act, the Bells point out.

Invisible to public

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