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Federal rules still being drafted would require regional phone companies to continue sharing their networks with companies competing for local business customers but eventually to stop providing access to rivals for residential service. The proposal being written at the Federal Communications Commission is a rewrite of regulations covering operations of the regional phone companies — Verizon Communications Inc., SBC Communications Inc., Qwest Communications International Inc. and BellSouth Corp. A person with direct knowledge of the proceedings said Friday that language in the draft would stipulate that the regionals continue leasing their lines at discount rates to local competitors who serve small and medium-sized businesses. The discounts could be as much as 40 percent below the rates that would be available without government intervention, said the person, who spoke on condition of anonymity because the proposed rules have not been made public. The rules also would allow a transition period in which competitors such as AT&T Corp. and MCI Inc. would be able to continue paying discounted leasing rates to use networks of regional carriers for local service. The length of the transition period is unclear. Agency staff are focusing their rewrite on the small business rules because they think they have a better shot that the courts would uphold those rules. The five-member FCC is likely to vote on the rules on Dec. 15. The agency would not comment on the proposed rules. The FCC had to begin writing new phone regulations after the U.S. Court of Appeals for the District of Columbia threw out in March agency rules that allowed states to require the regional carriers to lease parts of their networks at deep discounts. The Supreme Court refused to hear appeals sought by AT&T, MCI and others that said without the discounts they could not afford to compete for local phone service. The court also remanded to the FCC the rules governing small and medium-sized business customers. The proposals being written have been tweaked to take into consideration the court’s objections to having the states decide whether rivals need to use the regional carriers’ equipment. The FCC would make that call under the proposed rules. The Association for Local Telecommunications Services, which represents rivals to the regional carriers, said phone competition rules for its members need to be preserved. “If the FCC fails to make transmission facilities available to competitive carriers, they will be cutting off broadband and phone services to the nation’s small and medium-sized businesses,” said Jason Oxman, the association’s general counsel. One regional carrier said the line access for rivals is not needed. “We have been trying to demonstrate to the commission that competition is rampant in the business marketplace from competing phone companies that offer telephone service to business customers,” BellSouth spokesman Bill McCloskey said. It’s not certain, though, whether the access that new rules would afford the regional carriers’ rivals would be enough for them to survive, said Blair Levin, a former FCC official who is an analyst with the Legg Mason investment firm. Levin said it’s clear that the regionals’ rivals will win the right to ride to some extent over existing Bell facilities. But, he said: “Is it sufficient to actually have a business plan that has a reasonable chance of success? That’s a different question.” A few months after the appeals court decision, AT&T announced it would no longer market its local and long-distance service to residential customers. It said it would continue to provide service to current residential customers but would focus its future efforts on business customers. MCI also has begun to pull back in some residential markets. About 19 million people — roughly 15 percent of those with home phones — buy local service from a company other than the regional providers. Copyright 2004 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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