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Bells enlist Intel, Compaq in data battle

Five of the nation's biggest local phone companies join with technology's heavy hitters to petition the federal government for new rules governing high-speed Internet access.

Five of the nation's biggest local phone companies joined with Intel, Compaq, Microsoft and Gateway today to petition the federal government for new rules governing high-speed Internet access.

The companies jointly submitted a set of principles that would allow the Baby Bell companies to offer high-speed digital subscriber line (DSL) access directly to businesses and consumers. Under a FCC proposal now under consideration, the phone companies would only be able to do this through subsidiaries, a model they say would slow the rollout of DSL lines.

It's a refrain long heard from the Bell companies, which petitioned the FCC earlier this year with a similar proposal. But they hope that the addition of the computer companies will give the petitions more weight.

"Our customers tell us they are clamoring for faster Internet connections," said Rod Schrock, a senior vice president in Compaq's consumer products division. "This proposal would ultimately give consumers the fastest Internet experience possible by accelerating deployment of high-speed ADSL access."

But the Bells have a difficult task in front of them. Policing the pipelinesIn August, the FCC outlined a set of rules that state data traffic should be regulated like voice traffic. Under this proposal, the commission said it did not have the authority to give the Bells the ability to offer nationwide DSL service, until they had opened their local voice telephone markets sufficiently to competition.

No Bell company has yet met the FCC's standards for local competition.

In the letter sent to the FCC commissioners today, the companies outlined a set of principles that they promised to adhere to, in return for being allowed to offer direct DSL service.

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The Bells said they would make their central offices more open to rivals, and would give all ISPs equal access to the high-speed data networks.

In return, the Bells would be not have to set up separate subsidiaries for their data networks, and would not have to give rival local telephone companies discounted wholesale access to the DSL networks, as they currently are required to do with their voice network elements.

"Regulation must not add unnecessarily to the cost of providing Internet access and other advanced network services," the companies wrote in their letter. "Otherwise, high speed Internet access could be made unnecessarily, if not prohibitively expensive for large numbers of residential and small business users."

Analysts said the proposal, which was made with considerable fanfare at a press conference in Washington, marked only the latest shot in a lobbying battle between the Bells and the long distance companies.

"The computer guys carry a good bit of weight," said Scott Cleland, an analyst with the Legg Mason Precursor Group. "The take away from this is that the telcos say the current rules are not going to make it economical to reach consumers with DSL, which is regulators key concern."

But some analysts said the announcement was more smoke than substance.

"This is typical Bell mentality," said Abhi Chaki, a telecommunications analyst with Jupiter Communications. "They're basically just trying to say we don't want to unbundle our loop for competitors. It's posturing at this point."

The big long distance companies, which have lobbied hard to prevent the Bells from entering the long distance markets, were quick to respond to the proposal.

"[This is] a typical monopoly ploy to extend bottleneck control of voice services to the Internet," said Jonathan Sallet, MCI WorldCom chief policy counsel, in a statement. "In exchange for 'promising' to do some of what the Telecom Act already requires them to do, these phone monopolies ask that they be excused from complying with many of the law's other pro-competitive requirements."

MCI itself is in the middle of a nationwide rollout of DSL services, which is scheduled to reach 600 points of presence by March of next year.

The FCC has until February of next to make a final decision on how the Bells' data services should be regulated.