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Already reeling from high debts, low stock prices and many bankruptcies, the newer group of telecom companies says they are bracing for legislation that could permanently cripple their troubled sector. Gathering in northern Virginia, representatives of the companies known as competitive local exchange carriers, or CLECs, met Wednesday to mobilize support to defeat a bill co-sponsored by Rep. Billy Tauzin, R-La., and John Dingell, D-Mich. The Tauzin-Dingell bill, backed by the country’s four former Baby Bells, CLEC representatives say, would badly weaken their ability to force companies such as Verizon Communications and SBC Communications to open their local networks to rivals. The bill could be introduced before the House adjourns for the year. If it doesn’t make it to the House floor, the proposal will be debated early next year. But regardless of whether the Tauzin-Dingell bill becomes law, the companies that grew out of the Telecommunications Act of 1996 already have many problems as a result of high debts and shrinking revenues. Over the past 12 months, more than 15 CLECs have filed for bankruptcy. For those still afloat, their stock prices have fallen by 95 percent since the beginning of the year. Looking into early 2002, analysts suspect a handful of other telecom startups may also go bankrupt. Last week, Herndon, Va.-based, Net2000 Communications filed for Chapter 11. “The CLECs are already having a hard time reaching profitability,” said UBS Warburg analyst Glenn Waldorf. “Tauzin-Dingell would be an additional problem, and right now, they don’t want more trouble.” The Tauzin-Dingell bill is meant to water down provisions of the Telecommunications Act which obligated regional Bell operating companies, or RBOCs, to provide unfettered access to the telephone wires that reach into the nation’s homes and businesses. At a recent conference, Verizon Communications CEO Ivan Seidenberg said the bill is necessary to remove a section of the 1996 Act which allows the Federal Communications Commission to regulate prices CLECs pay to use RBOC networks. Seidenberg says RBOCs are unfairly strapped with fees not carried by the cable-television industry. Cable providers, using cable modems, own roughly 75 percent of local broadband connections. “The rate-of-return regulation is the single greatest deterrent to telco expansion,” he said. “The cable industry doesn’t have it.” But if companies such as Verizon are allowed to set the rates for access to their networks, or worse, decide not to service a competing CLEC, prices for DSL access would rise, countered Jason Oxman, general counsel of Covad Communications Inc. “Let’s remain true to the spirit of the [1996] Act, which was to spur competition in order to get better service, lower prices and more companies providing broadband,” said Oxman. After receiving a $150 million cash infusion earlier this month from SBC, Covad is hoping to be able to re-emerge from bankruptcy early next year, Oxman said. “All we’re looking for from Congress is to stay on the path we’re on.” Oxman and others say they are confident the bill can be defeated in the House. Even if it does manage to pass the House, opposition is strong in the Senate, where Sen. Ernest “Fritz” Hollings, D-S.C., chairman of the Senate Commerce Committee, remains a strong CLEC supporter. John Windhausen, president of the CLEC industry group, the Association for Local Telecommunications Services, warns that more than 77,000 jobs would be lost were Tauzin-Dingell to pass. “If we can’t obtain the access to their networks, we have no way to connect to our customers,” said Windhausen, a former counsel for the Senate Communications subcommittee. “The Bells are arguing that broadband deployment requires a return to a monopoly.” Copyright (c)2001 TDD, LLC. All rights reserved.

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