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The Federal Communications Commission on Friday moved to deregulate phone companies’ DSL broadband services, which will make it dramatically more difficult for smaller Internet service providers to offer high-speed service. The agency voted 4-0 to allow big local phone companies, the so-called Baby Bells — Qwest Communications International Inc., SBC Communications Inc., Verizon Communications Inc. and BellSouth Corp. — to cut off access or negotiate harsher terms for ISPs to use their broadband networks. The FCC, backed by major telephone and cable companies, argues that telecom and cable companies will be more willing to upgrade their systems for broadband and roll out new services faster if they aren’t forced to let their rivals piggyback on networks the major companies are spending billions of dollars to construct. “The access rules inhibit deployment of infrastructure,” FCC Chairman Kevin Martin said. The rule may also encourage entrepreneurs to offer service via largely untapped technologies, confident that competitors won’t get a free ride on their investment. But consumer advocates argue that independent ISPs, those that neither telephone nor cable companies own, create competition that keeps prices low for consumers. Although independents will see no change in their ability to provide much slower dial-up service, the advocates argue that consumers are increasingly rejecting that service, and independents will likely go bankrupt without regulated access to telephone digital subscriber line (DSL) and cable infrastructure. “This is bad news for the people who use the Internet,” said Andrew Schwartzman, president of Media Access Project, a Washington-based public interest law firm. “It means higher prices, less competition and disincentives for those entrepreneurs who have used the Internet as a platform for innovation and economic growth.” Dave Baker, vice president of Atlanta-based EarthLink Inc., said the action did not surprise him. Baker added that he expects the ISP to extend its commercial agreements with the Bells and continue to deliver DSL services to customers. He would not comment on whether EarthLink would file a suit against the FCC order. “It’s too early to speculate on what we’re going to do,” he said. Blair Levin, analyst at Legg Mason Inc. in Washington, noted in a report that he expects the FCC order to be challenged in court by ISPs, creating “significant litigation risk.” The FCC unanimously approved the change by moving DSL service from one regulatory designation to another. Now DSL will be viewed as an “information service,” rather than a “telephone service,” as it was previously. Until now, EarthLink and other independent ISPs that don’t own their own communications networks have been able to rely on legacy voice interconnection rules to provide high-speed Internet. A recent Supreme Court decision was a key factor prodding the agency’s latest action. The highest court in June upheld a long-standing FCC policy shielding cable companies such as Comcast Corp. from sharing their high-speed lines. After that decision Martin immediately began efforts to deregulate telephone DSL to create parity in regulation of the two main high-speed Internet platforms. “This order levels the playing field for broadband providers,” Martin said at an agency meeting. To ward off immediate disruption for independent ISPs, the FCC is requiring Bell companies to continue to provide access to ISPs for an additional year. The FCC also ruled that DSL providers must continue contributing to the Universal Service Fund, which subsidizes rural phone and Internet service, for 270 days in order to give the commission time to reform the system. The one-year transition period and Universal Service condition made up what appeared to be an apparent compromise with the agency’s two Democratic commissioners, Jonathan Adelstein and Michael Copps. Because there is a vacant Republican seat on the five-member FCC, Martin had to convince at least one of the Democrats to approve the DSL deregulation. Copps and Adelstein grudgingly agreed to support the order, noting that the Supreme Court decision changed the legal landscape. “The writing was on the wall,” Copps said. “Either it is adopted now or soon.” Copps added that he did not think the decision will help consumers and that he will scrutinize how the broadband industry unfolds. Commissioners also issued a policy statement promoting unimpeded access to all services on the Web. Copps and Adelstein worried that deregulating DSL would strip the FCC of its power to ensure that Bell DSL providers do not restrict access to rival Web sites or block the calls of Internet-based phone services using their wires. Copyright �2005 TDD, LLC. All rights reserved.

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