August 5, 2005

U.S. FCC eases regulations on DSL broadband

By Jeremy Pelofsky

WASHINGTON (Reuters) - U.S. communications regulators on
Friday lifted regulations on high-speed Internet services
offered by local telephone companies like Verizon
Communications, in an effort to boost fast Web access.

The Federal Communications Commission unanimously agreed to
treat the service, known as digital subscriber line (DSL)
broadband, as an "information service," which insulates it from
many traditional telephone rules like requirements to lease
network access to competitors at regulated rates.

The designation would allow the big local telephone
companies like Verizon, called the Baby Bells, to cut off or
potentially negotiate new terms for Internet service providers
such as EarthLink Inc. to use their networks for broadband.

The United States has fallen to 16th in world rankings of
broadband deployment per capita, leading Republican FCC
Chairman Kevin Martin to make rolling out high-speed Internet
service to consumers a top priority.

"Broadband deployment is vitally important to our nation as
new, advanced services hold the promise of unprecedented
business, educational and health care opportunities for all
Americans," he said.

The FCC's decision followed days of intense negotiations
and marks a political victory for Martin, who had to sway at
least one of the agency's two Democrats since there is a vacant
seat on the five-member panel.

The decision follows a Supreme Court ruling that backed the
FCC's 2002 ruling that cable broadband is an information

Cable and telephone carriers are competing to offer a suite
of services, like fast Internet, video and voice service, and
currently serve about 37.5 million customers. DSL is seen as
attractive because it is cheaper, but it offers slower data
download speeds than cable service.


The decision won praise from telephone companies but drew
some disappointment from the FCC Democrats as well as ire from
consumer advocates, who worried about rising prices and fewer
choices for consumers.

"The order is far from ideal," said FCC Commissioner
Michael Copps. "We take the dramatic step of reclassifying DSL
in order to spur broadband deployment and to help consumers. I
want to test that proposition a year from now."

The FCC decided to require DSL providers to continue for
nine months to pay into the universal service fund (USF), which
subsidizes communications services in certain cases, unless a
new funding mechanism were developed sooner.

The ruling also provides a one-year transition period for
independent Internet service providers and the Bells to
negotiate access agreements for existing customers.

"We are confident that we will extend our existing
commercial agreements with the Bells so that we can continue to
deliver DSL services," EarthLink's vice president for law and
public policy Dave Baker said. Company shares fell as much as
2.6 percent before recovering.

Facilities-based broadband providers and Internet telephone
service providers that connect calls to the public telephone
network will have to accommodate requests for wiretaps by law
enforcement agencies, the FCC decided, agreeing to a request
from the Justice Department.

The commissioners also issued a policy to encourage
broadband providers to allow consumers to surf anywhere on the
Internet and run any applications or software, but acknowledged
that enforcement powers were limited. There have been concerns
that broadband providers might block competitors' sites.

Verizon and SBC Communications Inc., the two biggest local
telephone carriers, have complained they were at a disadvantage
in competing against the cable operators because their service
has been subject to stricter rules.

"The benefits of this ruling will ripple across our
communities by encouraging greater investment in and a wider
roll-out of broadband networks," said James Smith, SBC's vice
president for FCC matters.