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FCC: Let Bells build networks

The agency proposes lifting some restrictions on Baby Bells building data networks to help promote faster Net access for consumers.

Striving to speed up the Net, the Federal Communications Commission today proposed lifting restrictions on Baby Bells to spur their investment in high-speed networks.

Under the proposed rules, Baby Bells could set up data networks as subsidiaries, but would no longer have to sell access to their networks at a wholesale cost to competitors. Although the Bells would not have to share access to their technology, the new subsidiaries would have to pay the same rates as other independent competitors for access to the local switch centers.

"By opening up and unleashing the power of these high-capacity networks to promote commerce we are going to improve the lives of American consumers," FCC Chairman William Kennard said before the vote.

The five-member FCC unanimously agreed and requested public comment on the proposal, which could be approved within six months.

The Bells had been hankering for regulatory breaks that would help them dive into the broadband business, including setting up services via digital subscriber lines (DSL). However, all petitions for relief were denied by the FCC. Without regulatory cutbacks, the companies say they cannot afford to build new systems or relieve the Net's strain on their networks.

Under the 1996 telecommunications law, the Bells are forbidden from offering long distance and data services within their local regions until they open their local telephone networks to competitors.

Today's move is a concession by the FCC to try to fuel competition and the deployment of broadband technologies to speed up the delivery of video and huge packets of data over the Net.

Consumers also could benefit from the plan through lower prices, argues the FCC. Since all high-speed access companies--including the Baby Bell subsidiaries--would have the same access at the same price as the local switch centers, they would compete with each other equally. The FCC hopes the competition between companies will naturally drive down prices.

"With the separate affiliate approach, all providers of advanced telecommunications service begin at the same starting line and have a fair opportunity to bring consumers the best product, at the best value, consistent with the pro-competitive, deregulatory intent of Congress in passed the 1996 Act," Kennard noted.

Still, smaller phone companies that compete with the Bells and long distance companies such as AT&T and MCI Communications oppose the data network waivers because, they argue, the Bells have not opened their existing networks to competitors.

"It remains to be seen whether anyone can really watchdog the Bells once they set up these subsidiaries," said Jim Crawford, a spokesman for the Association for Local Telecommunications Services, whose membership includes WorldCom, Covad Communications, and Nortel.

"We are concerned about how the [FCC] will guarantee that these subsidiaries are separate," he added.

Large Bells also criticized the FCC today, arguing that forcing Bells to set up subsidiaries is not exactly regulatory relief.

"Unfortunately, the action falls short of the 'giant leap' required to deploy advanced telecommunications services to all Americans and to spur real growth in jobs, investment, and money," Tom Tauke, senior vice president of Bell Atlantic, said in a statement.

The details of the FCC proposal are expected in ten days.

But the plan already lists some requirements to insure that the Bells' data subsidiaries are not given better prices or access to the local network compared to rivals. For example, Bell data operations will have to keep separate accounting books and appoint their own executives, and must wait in line with competitors for access to the local switch center.

Reuters contributed to this report.