FCC unplugs states' rules on 'naked' DSL

The ruling kicks off an investigation into naked DSL--selling broadband access by digital subscriber line without attaching it to other services, such as a local phone line.

The FCC voted 3-2 to suspend public utility commission regulations in Florida, Georgia, Kentucky and Louisiana that had forced BellSouth to sell DSL service to other telephone operators, separate from its local phone service. In the past, the two services had been inextricably linked.

That decision sends a strong message to other state utility commissions that might be considering similar rules, which were intended to encourage the widespread availability of naked DSL. The Bells--BellSouth and the nation's three other top phone and DSL providers--have warned that slightly different naked DSL rules in each state could slow broadband growth in the United States and undermine BellSouth's incentive to invest in the service and the underlying network.

Proponents of the state rules say naked DSL keeps the Bells in check, promotes competition and holds broadband prices under control. BellSouth said the market is better served by not letting states set up a confusing maze of regulatory regimes.

"This FCC order continues progress on clearing out regulatory underbrush that handicaps rolling out broadband," Jonathan Banks, BellSouth vice president of federal executive and regulatory affairs, said in a statement. "By affirming a single national policy in this area, this FCC action will increase the speed and efficiency of bringing to consumers new and innovative broadband service offerings over wireline networks. This order is an important step in achieving the president's goal of increased broadband deployment."

A BellSouth spokesman couldn't immediately be reached Friday to discuss the fate of 8,000 or so BellSouth DSL customers in the four states. Aside from users of naked DSL services, an FCC decision would also affect "cord-cutters," a group of about 20 million U.S. residents who don't have local phone lines and go solo instead with their cell phones. As a result of the FCC ruling, cord-cutters may have to buy a local phone line to get DSL.

Providers of voice over Internet Protocol software--which lets an Internet connection serve as a telephone line--will also feel some pain, for the same reason as cord-cutters. VoIP calls are meant to replace phone lines sold by the Bells; and while they're possible with a dial-up connection, most VoIP operators require that users have a broadband connection to make full use of their offerings. As a result of the FCC ruling, some VoIPers must get DSL and a local phone line from a Bell, should a cable operator's more expensive broadband be unavailable in their area.

VoIP operators don't need to build a network of connections to every home. Rather, as in the case of top U.S. commercial VoIP provider Vonage, they need only require that subscribers bring their own broadband service. It's this class of VoIP provider--those that don't own facilities--that are expected to feel the deepest effect from the decision.

Nudity is optional
The commission specifically decided states can't force the Bells to provide DSL over Bell-supplied voice lines being resold by competitors under FCC mandates called UNE-P. Bellsouth has for several years had a policy not to resell DSL service to customers purchasing voice services from competitors using the UNE-P rules.

Approaching the issue in slightly different ways, state utility regulators created rules starting in 2002 to get around this policy, which prevented BellSouth voice customers from getting DSL from a competitor.

The FCC decided that the states didn't have a right to do so, according to a brief review of the 24-page decision. But this promotes the same practice of "tying" that the Bells use to throttle naked DSL, Commissioners Michael Copps and Jonathan Adelstein wrote in their joint dissenting opinion.

"Beyond this is another ominous precedent for consumers," the commissioners warned. "If it is permissible to deny consumers DSL if they do not also order analog voice service, what stops a carrier from denying broadband service to an end-user who has cut the cord and uses only a wireless phone?

"What prevents a carrier from refusing to provide DSL service to a savvy consumer who wants standalone broadband only for VoIP? Regrettably, these broader issues go virtually unexamined."

The commissioners said investigation into just these issues was "an afterthought."

The Bells are mixed on naked DSL. Qwest has been selling DSL-only service for months. Verizon Communications has said in the past that it intends to voluntarily sell a DSL-only service, but its self-imposed deadline has passed and there's still no offering. "In the past, we have always provided DSL with a phone number," Verizon Chief Executive Ivan Seidenberg recently told the Senate Judiciary committee. "That's the way we provide service....We are in the process of working through the mechanics of offering a DSL line without a phone number."