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California to consider DSL "free ride"

The state's Public Utilities Commission takes up a dispute between Pacific Bell and a San Jose startup that could set a national precedent for how Baby Bells and their competitors do business.

The California Public Utilities Commission is set to vote tomorrow on a disputed pact between Pacific Bell and a San Jose startup that could set a national precedent for how Baby Bells and their competitors do business.

PDO Communications, a two-year-old competitive local exchange carrier (CLEC), hopes to use the local phone company's wires for high-speed Internet services known as digital subscriber lines, but the two companies cannot agree on terms. DSL uses standard copper phone lines to deliver data at speeds about 30 times as fast as a common 56-kbps dial-up connection.

DSL deals between local phone companies and competitors are nothing new. Pacific Bell entered into agreements with 48 CLECs last year, although some of these involved voice data, not DSL.

But PDO's proposal--in which the company offers to pay Pacific Bell for installation and storage of its equipment, but not for usage of Pacific Bell's wires--differs from most. Pacific Bell executives to describe the plan as "unfair" and characterize PDO's intent as seeking "virtually a free ride."

Most CLECs, such companies as NorthPoint Communications, Covad Communications, or Rhythms NetConnections, lease "unbundled loops" from the local phone company to deliver data traffic to consumers. Unbundled loops are essentially the copper wires that run between a local phone company's central office facilities and a customer's home or office.

DSL technology allows data and Internet traffic to run at higher frequency over copper lines, leaving voice communications undisturbed--meaning consumers can talk and surf the Web at the same time. DSL is an inexpensive alternative for small and mid-sized businesses compared to leased line connections such as a T1 or ISDN, but critics say the technology still costs too much for mass market residential users.

Many CLECs charge more than $80 per month for service and users still need to pay an Internet service provider (ISP) for Net access.

In January 1998, PDO approached Pacific Bell about running data traffic over existing phone lines that run into consumers' homes, instead of leasing second lines for data traffic, as other CLECs do. The process, known as "sub-loop unbundling" or "line sharing," is at the heart of the debate.

PDO contends it's entitled to utilize Pacific Bell's network under provisions of the Telecommunications Act of 1996, arguing that the law requires Baby Bells to make available any "unbundled network element" that is technically feasible to do so.

"PDO wants them [Pacific Bell] to further break down that unbundled loop to break down the copper wire and utilize its functionality," said PDO lawyer Christine Mailloux, of the Blumenfeld & Cohen law firm in San Francisco. "That copper wire is perfectly capable of handling multiple services."

But the local phone giant, owned by SBC Communications, worries about the quality of voice service and the ability to deliver emergency 911 calls if PDO wins.

Provided it doesn't have to pay for additional leased lines--something that Pacific Bell's DSL division doesn't have to do--PDO says it can offer residential consumers discounted SDSL service, at speeds of up to 1.1 Mbps (megabits per second), for about $50 per month. Presently, the company suffers an unfair competitive advantage, PDO says.

Pacific Bell currently offers a service called ADSL Home Pack starting at $59 a month.

"The [1996 Telecom] Act says Pacific Bell should treat CLECs the same way it treats itself. We are willing to pay Pacific Bell what Pacific Bell charges itself for its own DSL service--zero," Mailloux said. "In order to compete that's what we need."

Pacific Bell officials say PDO is simply looking for a free handout, and that PDO's proposal would allow the company to unfairly undercut both Pacific Bell and other CLECs.

"This would discourage the building of new facilities because companies would be reluctant to build infrastructure if their competitors can use it for free," said John Britton, a Pacific Bell spokesman.

When PDO and Pacific Bell could not agree on terms of the interconnection agreement, due largely to the so-called line-sharing issue, PDO filed for arbitration in June. The arbitrator drafted a revised agreement that does not require Pacific Bell to let PDO "piggyback" on its lines, effectively supporting the local phone company.

California Public Utilities Commission administrative law judge Philip Weismehl later filed an opinion supporting the arbitrator's ruling.

"The arbitrator...concluded that while PDO could purchase its own loops from Pacific Bell, it could not compel Pacific Bell to share the loop that Pacific Bell was itself using to provide service to its own voice customers," Weismehl wrote.

The CPUC will consider the issue tomorrow in San Francisco. The Federal Communications Commission also is considering the line sharing issue and is expected to make a decision later this month or in early February.