- The Washington Times - Wednesday, December 4, 2002

Next month, surfing conditions in the virtual world could begin to improve, given the regulatory proposals the Federal Communications Commission (FCC) is expected to announce. The FCC will likely allow the technological platform for high speed Internet, or broadband, to expand, which would give Internet users a greater range of options. But existing limitations on Internet content could prevent demand for broadband from taking off. And for the Baby Bells, the regulatory forecast is mixed. Although the companies would benefit from broadband deregulation, the FCC isn't expected to overhaul current requirements to make their voice networks available to competitors at government-set (and below-market) prices.

Most FCC watchers believe the agency will free the Baby Bells (Verizon, SBC, BellSouth and Qwest) from having to make their broadband infrastructure available to competitors. The FCC is also expected to broaden the wireless spectrum for broadband. "The time is ripe for spectrum policy reform," an FCC task force report said. "Increasing demand for spectrum-based services and devices is straining longstanding and outmoded spectrum policies." These long-overdue measures will bring new competition to the broadband market, which is currently dominated by cable companies. Cable rates have risen 36 percent since 1996.

Still, the ability of Internet service providers to limit surfers' ability to visit certain Web sites could temper demand for broadband. A number of companies including Amazon.com, Apple, Disney, Microsoft and Yahoo have written to the FCC expressing their concern regarding these limitations. "Broadband Internet service providers," said a letter from Amazon.com, "may intentionally impede consumer access to Internet-based information, products and services in many ways." Internet service providers, for example, can block users' access to competitors' Web sites or guide users to sites in which they have an interest.

Fortunately, the widely anticipated deregulation of the broadband market could prevent cable companies from acting as the Internet's gatekeeper. Still, existing law could have an impact on Internet content. The Digital Millennium Copyright Act, passed in 1998, makes Internet service providers potentially liable for providing access to Web sites that post material claimed to violate a copyright. This law has been abused in the past by players wishing to block content for a variety of reasons, such as a desire to prevent access to criticism of products or business practices. Service providers have a cash incentive to quickly drop content to avoid potential lawsuits. While the FCC should strive to ensure the broad virtual universe doesn't become a platform for copyright violation, it should also prevent copyright law from being wrongly invoked.

And come January, the FCC should heed some of the legitimate concerns of the Baby Bells regarding the harmful effects of existing regulation. By law, these local telephone carriers must lease their voice networks at prices that many analysts say are below cost. The FCC should reconsider which parts of the networks the Baby Bells must provide their competitors access to and come up with a better pricing model for leasing those parts. Also, the FCC shouldn't employ a one-size-fits-all analysis, since the need to lease elements varies nationally.

At a meeting with editors from The Washington Times, Margaret Greene, president of regulatory affairs for BellSouth, said that existing telecommunications regulation has spawned a number of "virtual companies" with no facilities of their own. These companies "ride our networks," said Mrs. Greene, adding that their access to BellSouth's infrastructure dampens the company's incentives to innovate, expand and, thereby, create new jobs.

The FCC isn't expected to institute a sea change in voice-network regulations next month. But deregulating broadband could give the debt-ridden Baby Bells the opportunity to make up for their lagging local telephony business. And, as broadband options expand, competition may drive prices down.

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