- The Washington Times - Friday, February 21, 2003

ASSOCIATED PRESS

Federal regulators agreed yesterday to let states decide whether to spur competition between the regional Bell phone companies and their rivals, a move that drew sharp criticism from Federal Communications Commission Chairman Michael Powell.

The panel's 3-2 vote "could prove quite harmful to consumers," Mr. Powell said in his first dissenting opinion as chairman.

The FCC voted to grant states that authority as a compromise between ensuring competition and deregulation, despite arguments from Mr. Powell and the Baby Bells that existing federal competition rules should be eliminated.

The Bells did score a victory, however, when the commission, in another split vote, eased restrictions requiring them to provide rivals discount access to fiber-optic lines for broadband, the high-speed Internet access that quickly delivers large amounts of data.

The Bells have complained for years they have no incentive to invest in costly new fiber-optic networks if competitors can share the benefits.

Republican Commissioner Kevin Martin, who voted with the panel's two Democrats to shift authority from the federal government to the states, said the decisions "will have a direct impact on consumers."

He added that the ruling would preserve lower, competitive phone rates and boost the availability of high-speed Internet access.

But Mr. Powell said that in the majority decision, "one looks in vain to find a clear or coherent federal policy."

In a long, critical statement, Mr. Powell said the decision "could prove quite harmful to consumers" and will "prove too chaotic for an already fragile telecom sector."

He applauded the broadband decision but called the phone competition ruling a "molten morass of regulatory activity."

It is unusual for a chairman of the agency to dissent on such a large matter, said Blair Levin, chief of staff for former FCC Chairman Reed Hundt and now an analyst with Legg Mason, a Baltimore investment firm.

Behind the commission's divided vote is a requirement that the regional Bell companies lease parts of their local networks to competitors such as AT&T Corp. and WorldCom Inc. at discount rates.

The policy was adopted seven years ago to encourage companies to compete in the Bells' markets while giving the Bells the chance to offer long-distance service in their regions.

The Bell companies BellSouth Corp., SBC Communications, Verizon Communications and Qwest Communications have said they are at a disadvantage because the rules allow competitors to undercut their prices.

AT&T and other companies say the competition requirements allow them to offer alternative service and prevent the Bells from having an overwhelming advantage.

The issue had sparked a lobbying campaign by the companies.

The vote was the commission's last chance to meet a court-ordered deadline to rewrite the policy before existing rules are struck down. Courts have rejected the agency's last two attempts to revise the rules, saying they failed to meet the requirements of a 1996 telecommunications law.

Democratic Commissioner Michael Copps said the FCC decision will "preserve voice competition in the local markets and allow it to grow."

He said he opposed the broadband changes because they would harm competition and result in higher prices for Internet access.

Republican Commissioner Kathleen Abernathy, who joined Mr. Powell in voting against the competition rule change, said the decision will not stand up under legal challenges and that dealing with different rules in different states "will be a nightmare for anyone to carry out a business."

Gene Kimmelman, co-director of Consumers Union in Washington, said shifting authority to the states is "just putting a little patch on an enormous problem."

He said that to create lasting competition, Bell rivals eventually will have to build their own networks.

Mr. Kimmelman said the alternative sought by Mr. Powell would have wiped out competition.


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