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Decision threatens competitive phone rates

By ELLEN SIMON
The Associated Press

FCC Chairman Michael Powell

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But when those rate increases will come — or if they'll really come at all — is open to debate.

The telecommunications industry is already so roiled by technology-induced tumult — including the proliferation of cellphones and Voice Over Internet Protocol — that some analysts think regulation is hardly needed to keep prices down.

When a federal appeals court in March threw out rules that required regional Bells to sell competitors access to their networks at a discount, MCI, AT&T and state regulators cried foul.

A day after the White House declined to join the legal fray, the Supreme Court was asked to stay the lower-court ruling in petitions by AT&T, MCI, an association of state regulators, plus California and Michigan.

Federal Communications Commission (FCC) Chairman Michael Powell said he wants the agency to write new rules that would phase in any wholesale price increases for leasing of local-telephone networks by rivals.

The rules should require "as minimal consumer disruption as possible, and any price increases to be steadily phased in, if necessary, to minimize disruption and provide state and federal regulators more guidance," Powell told reporters after an FCC meeting in Washington. The court ordered the FCC regulations to end Tuesday. The agency "may be able to finish not just interim rules but final rules this year," said Powell, 41, a Republican who was appointed FCC chairman by Bush in 2001. "I certainly would like to try."

David Isenberg, an independent telecom analyst, called the Bush administration's inaction, which is widely seen as favoring the regional Bells, "kind of like a lobster dinner for a dying patient."

The appeals court decision "is fundamentally anti-competitive, but the fundamental basis of competition has changed," he said.

About 19 million consumers — roughly 15 percent of those with home phones — buy local service from a company other than the regional Bells: Verizon, SBC, Qwest and BellSouth.

They can do that thanks to the overturned rules, which the regional Bells said forced them to sell access to their networks at a loss, keeping them from making further network investments. The competitors said the Bells still made money selling access and were fighting the rules because they didn't want competition to lower the price of local calls.
 
Most telecom-industry observers say the decision to scuttle network-sharing rules is bad for consumers.

"The more the regional Bells' death grip on the customer is extended, the less they have to do to offer new services," said Johna Till Johnson, president of Nemertes Research. "Today's high costs stay high and new services that could be coming in don't."

Some, like Mark Cooper, director of research for the Consumer Federation of America, go even further, saying the move will drive competitors out of the local market.

"In the worst-case scenario, the competitive local exchange carriers will disappear, and that will take all the competitive pressure off the Bells," he said.

The Wall Street Journal, citing unnamed sources, reported yesterday that the administration's decision could prompt MCI to exit the consumer phone business completely. Its consumer business is about 20 percent of the company's $21 billion in total revenue.

"We will not be able to discuss changes until our own internal analysis is complete," said Carolyn Tyler, an MCI spokeswoman.

Gene Kimmelman of Consumers Union said the move could drive the price of a local phone connection up from below $25 to somewhere between $30 and $35.

"Local phone companies, for years, have been saying they need to charge customers $30 or $35 just to connect to the network," Kimmelman said. "The question is, will something else come in to replace it? We don't see that coming in quickly."

It may not come quickly, but it will come, Isenberg said.

"In 10 more years, when we're all using our computers with Voice Over Internet Protocol, telecom companies won't really have much to sell," he said.

In the meantime, the average consumer won't see their rates go up, because the percentage using competitive carriers locally is just too small, said Sam Simon, chairman of the Telecommunications Research and Action Center, which helps consumers find the best rates.

People skeptical that the move will raise rates also note that cable companies offering Internet connections are already offering phone service.

"The cable companies are the only other alternative for someone who's seriously considering a competitive option," Johnson said. "The only question is how quickly the cable companies are going to come in and take up the slack."

Material from Bloomberg News is used in this report.

FCC hastens spread of wireless Internet

WASHINGTON — The Federal Communications Commission (FCC) has adopted rules to give phone companies easier access to airwaves and hasten the rollout of wireless high-speed Internet services.

The rules will make it simpler for phone companies to use airwaves currently used mainly by universities and other educational groups for television broadcasts. The FCC adopted the regulations in a 5-0 vote Thursday.

The changes will help companies offer wireless-Internet services in areas that are too far from equipment that handles connections over regular phone lines, BellSouth spokesman Bill McCloskey said. BellSouth, the third-largest U.S. local-phone company, would use airwaves over which it previously tried to offer a wireless version of cable-TV, McCloskey said.

The FCC's order creates "simpler and more flexible rules" and groups together channels that had been separated to reduce likelihood of interference and make it easier for carriers to install wireless-Internet equipment, according to an agency statement.

Of 28.2 million high-speed Internet connections in the U.S. as of December, just 367,118 involved satellite or wireless means, the FCC said earlier this week. Worldwide sales of equipment for fixed-location wireless broadband services will rise to $1.2 billion in 2007 from $558.7 million last year, according to researcher In-Stat/MDR.

Bloomberg News