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Congress: DSL competition in jeopardy

A new broadband bill could be the final nail in the coffin of the industry, some members agree, while others vow stiffer fines for uncooperative Bells.

WASHINGTON--A broadband bill introduced Tuesday by two leading House members could lead to the death of the competitive DSL industry, several congressmen said Wednesday.

At a House Commerce Committee hearing on a bill that was only hours old, several Republicans and Democrats said that given the current economic uncertainty this was not the time to be passing any legislation that could make it harder for smaller telecom companies to compete. In doing so they defied the top members of their committee, Chairman Billy Tauzin, R-La., and top Democrat John Dingell of Michigan, sponsors of the bill.

Tauzin and Dingell want to deregulate Bells such as Verizon Communications and SBC Communications in their handling of data traffic, to give them financial incentives to deploy DSL in rural and underserved areas where profit margins aren't as strong. The bill primarily would allow Bells to carry data long distances--so they wouldn't have to pass data traffic off to a fiber provider--and would spare them from having to open up new broadband equipment to competitors.

That would rewrite the Telecommunications Act of 1996, which prevents Bells from providing voice or data long distance until they meet a long checklist in a given state they serve. But Rep. Chip Pickering, R-Miss., who as a Hill staffer participated in the writing of the Telecom Act, said the Tauzin-Dingell bill "is fundamentally flawed. It can't be fixed."

Pickering cited recent testimony by Federal Communications Commission Chairman Michael Powell, who said that given the difficult economy "any wholesale rewrite of the (Telecom) Act would be ill-advised."

Rep. Anna Eshoo, a Democrat representing Silicon Valley, said Bell competitors "have lost 90 percent of their stock value" in the last year.

see special report: Digital Darwinism "This bill drives the last nail into their coffin," Eshoo said.

But the bill's proponents weren't focusing on post-Telecom Act competitors such as Covad Communications. They said the lifting of regulations on Bells was necessary to level the playing field with cable providers such as AT&T, which has few broadband regulations and dominates the residential broadband market.

"This bill will ensure that no single segment of the industry is given a de facto monopoly," Dingell said.

But Rep. Heather Wilson, R-N.M., said that much has changed since an earlier version of this bill was introduced in the last Congress; namely, the telecommunications market has imploded. Her concerns appear to be reflected broadly in the House, as there are more than 160 House members who co-sponsored Tauzin-Dingell last year but chose not to do so when it was introduced yesterday.

Friendly fire
Tauzin had to face some resistance from his two most relevant subcommittee chairmen, Telecommunications Subcommittee Chairman Fred Upton, R-Mich., and Commerce & Trade Subcommittee Chairman Cliff Stearns, R-Fla.

The bill will be marked up, or amended and voted on, Thursday in Upton's House Commerce Telecommunications Subcommittee.

Neither chairman has co-sponsored the Tauzin-Dingell bill, and Upton said that before too much discussion occurs on liberating Bells from regulations, something should be done to give the FCC greater authority to punish them when they fail to allow a competitor to interconnect.

"I would note that the FCC's fines for phone companies' violation of the law are up to $100,000 per violation, capped at $1 million," he said, noting that Powell in his recent testimony called those amounts "trivial" to Bells and "the cost of doing business."

As the bill moves forward, Upton vowed, "I will seek to dramatically increase those fines and enhance other FCC enforcement tools to make sure that Chairman Powell and his colleagues at the FCC will be able to hurt--and hurt hard--those who violate the law."

Tauzin and Dingell have both stressed that they do not believe their bill will undermine the ability of competitors to interconnect with the Bell telephone networks.

Some suggested amendments that would require Bells, if given this regulatory freedom, to build out DSL in rural and underserved areas. The motivation for the bill, Tauzin and Dingell said, is to give the Bells assistance in closing the "digital divide," but others noted there would be nothing stopping Bells from continuing to focus on densely populated areas and simply reap greater profits.