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Powell: New phone competition rules soon

FCC chairman indicates that long-awaited rules to help AT&T and MCI stay in the local phone market are due very soon.

SAN FRANCISCO--The Federal Communications Commission is close to creating temporary telephone competition rules that could help AT&T, MCI and others stay in the local phone business, Chairman Michael Powell indicated here Monday.

Powell, in the Bay Area for various tech conferences and for meetings with executives at different wireless companies, said the five FCC commissioners now have a draft of the rules, which they'll rely on for about six months, until they create a permanent set. "Delivering to the floor," as Powell put his office's recent action, is a sign that the FCC's convoluted policy-making process is quickly nearing an end.

Powell did not "feel it prudent right now" to provide any details about what the rules suggest.

Federal regulators are under enormous pressure to create a way for local phone service providers to lease portions of local phone networks owned by the Bell operating companies: Verizon Communications, BellSouth, SBC Communications and Qwest. A court order that went into effect in mid-June eliminated the cheapest of the FCC options, known as UNE-P. Though there are still other FCC competition rules in effect, they're more expensive, making them available to fewer carriers.

Just what the FCC decides, both temporarily and permanently, will help determine the fate of the nation's two largest long-distance providers, MCI and AT&T, which have used the UNE-P rules to gain a majority of the 20 percent of the U.S. local phone market not served by a Bell operating company.

MCI and AT&T made announcements Monday that sent them in opposite directions when it comes to local phone business. AT&T announced it has completed the 29-state rollout of its unlimited local and long-distance broadband phone service, which is expected to attract 1 million subscribers by next year. In total, AT&T has about 4 million local phone customers.

Meanwhile, MCI has apparently put itself up for sale. The nation's No. 2 long-distance carrier said Leucadia National wants to buy 50 percent of MCI's stock for an estimated $2.8 billion, and it has begun soliciting antitrust clearance for a proposed sale.

"The domestic long-distance business model is very vulnerable," said Frost & Sullivan analyst Jon Arnold.