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A federal appeals court in Washington, D.C., on Friday ordered regulators to rewrite a government rule meant to increase the number of companies offering Internet users high-speed service over their telephone lines. A three-judge panel of the U.S. Court of Appeals for the District of Columbia also told the Federal Communications Commission to reconsider another broader rule aimed at stoking competition with the four regional phone companies, which emerged from the Bell System breakup and now dominate the local phone game. The FCC’s Internet rule requires the former Bells to allow competitors access to their telephone lines to provide high-speed Internet service, called Digital Subscriber Line, or DSL. But the challenge by the incumbent carriers through their trade group, the U.S. Telecom Association, was successful before the court. “The commission … completely failed to consider the relevance of competition in broadband services coming from cable (and to a lesser extent satellite),” Judge Stephen Williams wrote. Relatively few of the nation’s Internet users subscribe to more expensive broadband, which offers connections dozens of times faster than the standard telephone dial-up service. But most who do receive their high-speed service through cable modems and consumers have a choice between DSL and cable high-speed service in very few markets. FCC Chairman Michael Powell said the agency is already re-examining both rules targeted by the court’s decision. “We will be exploring many of the issues that the court raised in its opinion in the coming months as we evaluate the record in this proceeding,” Powell said. “In the meantime, the current state of affairs for access to network elements remains intact.” The Bells, which have argued that they are forced to share their networks at prices they claim are below the cost of construction, were pleased. “Today’s ruling is a very positive step forward in developing healthy, sustainable and economically rational competition that will benefit consumers,” said Jim Ellis, general counsel of San Antonio-based SBC Communications Inc., the nation’s second-largest local telephone company. Competitor companies, such as DSL provider Covad Communications Group Inc., disagreed with the decision. Covad founder Dhruv Khanna said he is confident that the FCC will still require line-sharing when it rewrites the rule. “While I believe the court was off-base in this decision, it ultimately shouldn’t change a thing for Covad,” he said. The 1996 Telecommunications Act provided several ways for companies to compete with the Baby Bells. Companies, including startups as well as big players such as WorldCom and AT&T, could build out their own calling networks, buy service from the local phone companies and resell it to consumers, or lease elements of the local network. The court questioned the related FCC rule that requires the former Bells to make a variety of elements of their calling networks available to competitors at deep discounts in every market, regardless of whether competition is suffering there or not. In recent months, the FCC has been at the losing end of several appeals court decisions. The court overturned rules barring a company from owning cable TV systems and broadcast TV stations in the same market. And, at the court’s direction, the FCC is reviewing rules forbidding a single company from owning television stations and cable outlets that reach more than about a third of the national audience, and restrictions on companies that want to own two TV stations in the same market. The court also said last year the FCC did not have the right to re-auction a chunk of coveted wireless spectrum that had previously been won by a company, NextWave Telecom, that later declared bankruptcy. Copyright 2002 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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