FCC Deregulates DSL

In a highly anticipated move, the Federal Communications Commission on Friday voted unanimously to remove regulations that required legacy phone companies to provide network access to their competitors.

Specifically, the Commission ruled that DSL is an "information" service instead of a "telecommunications" service, essentially leveling the playing field with cable operators. While the distinction sounds rather arcane, the stakes behind the classification change are enormous.

First, RBOCs are no longer required to lease their DSL lines to non-affiliated ISPs.

Additionally, the new ruling will alter (reduce) how much of their DSL revenue RBOCs must contribute to the Universal Services Fund.

There is a "grandfather" provision that requires RBOCs to continue to provide network access to their competitors for one year. Also, RBOCs must contribute a portion of their DSL revenues to the USF based on current calculations for 270 days, or until the FCC adopts a new contribution standard.

To be sure, the rule change has not caught anyone off guard. Indeed, FCC Chairman Kevin Martin has pushed for DSL deregulation ever since the Supreme Court handed down its decision in the Brand X case in June. In that decision, the high court upheld the FCC's rule that cable companies are not required to share their broadband lines with competitors.

"[The new rule] ends the regulatory inequities that currently exist between cable and telephone companies in their provision of broadband Internet services," Martin said. "[L]eveling the playing field between these providers has been one of my highest priorities. . . . [T]he actions we take in this Order are an explicit recognition that the telecommunications marketplace that exists today is vastly different from the one governed by regulators over 30 years ago."

Even though the vote was unanimous, not every commissioner was completely sold on the sweeping change.

"Were the pen solely in my hand, this is not the Order I would have drafted or the procedural framework I would have chosen," Commissioner Jonathan S. Adelstein said. "This Order, however, reflects meaningful compromise by each of my colleagues, and I appreciate the efforts to address many of my concerns about issues including the stability of the universal services fund, access for persons with disabilities, and the ability of competitive carriers to access essential input facilities."

Nevertheless, according to sources within the FCC, Martin and his fellow commissioners were so driven to level the broadband access playing field that staffers worked around the clock yesterday to prepare for today's announcement.

While many have speculated that the new rule will spell the end of competition for broadband services, some industry analysts disagree.

"[W]ith growing pressure (both regulatory and market-driven) on RBOCs to proliferate 'naked' DSL as primary line erosion continues, the door will increasingly be open to non-facilities-based VoIP competitors," stated an analyst at Deutsche Bank.

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Ted Glanzer is assistant editor for TMCnet. For more articles by Ted Glanzer, please visit: http://www.tmcnet.com/tmcnet/columnists/columnist.aspx?id=100033&nm=Ted%20Glanzer.

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