New bill could level DSL playing field

The law, if passed, would require the California Public Utilities Commission to set pricing and other guidelines for how competing local phone providers can offer DSL, or digital subscriber line services, over the same wire the local phone company uses to deliver voice service.

The market for DSL has heated up as providers make new marketing deals and cut prices on the high-speed data transmission technology. Local phone companies, like Pacific Bell in California, offer the service over a single twisted pair of copper wires.

Data-focused competitive local exchange carriers (CLECs) such as Covad Communications and NorthPoint Communications want to get into this lucrative market, but argue that local companies have an unfair cost advantage when it comes to existing networks.

The CLECs currently must lease a separate line from local firms to provide DSL services. If a customer wants to order the high-speed service from a provider other than their local phone company, they need to pay for the added line. This inflates the cost of the service, and leaves the CLECs at a competitive disadvantage, they say.

The Information Technology Association of America, a high-tech trade group, today announced its support for the legislation.

"Competitive carriers should have the right to provide DSL is precisely the same manner as the incumbent," ITAA president Harris Miller wrote in a letter of support. "That means that competitive carriers should also be able to provide their DSL service over an existing incumbent voice telephone line instead of running an unnecessary and costly second line."

The CLECs say the cost of running a second line will ultimately be passed on to consumers, effectively pricing competitive offerings out of the market.

"In the absence of line-sharing, customers who want to choose a competitive DSL service must pay for a second line to their homes," Michael Olsen, NorthPoint's deputy general counsel, wrote in a letter supporting the bill.

"The cost of the second line exceeds $20 per month, artificially inflates the cost of competitive offerings, and effectively excludes competitors from the residential DSL marketplace," he added.

The California bill, AB 991, sponsored by Assemblyman Lou Papan (D-Millbrae), faces a vote next week before the state Assembly's Utilities & Commerce committee, a 12-member panel that oversees business, telecommunications, and international trade issues.

Under the bill, California state telecommunications regulators would be required to set guidelines for delivering DSL over existing copper wires, also known as "local loops." The process is known as "line sharing," or "sub-loop unbundling."

The bill is sponsored by the High-Speed Access Coalition (HiSAC), a group of ISPs and other Internet companies including Infoseek and PDO Communications. That company failed in its attempt to get the state commission to require line sharing in January.

Covad and NorthPoint also officially support the bill. The data CLECs, which are currently concentrating on serving small and mid-sized business customers, argue they cannot compete on price with the local phone companies' residential DSL service.

Baby Bells lately have slashed prices even further for the high-speed services. Pacific Bell parent company SBC Communications trimmed the price for its residential DSL service to $39 earlier this year--one of the lowest prices in the industry, and on par with competing high-speed cable modem services.

Pacific Bell executives said line sharing raises many technical questions about quality of service, equipment maintenance, and whether the local phone company can ensure phone service if a competitor's DSL equipment were to malfunction.

"This makes very complex issues out of what today are routine customer service issues," said Michael Heenan, a legislative spokesman for Pacific Bell.

David Schlosser, a regulatory spokesman for SBC, said the company should not be saddled with regulations on data services because it is not the dominant, or incumbent, player--the way it is in the local voice market.

FCC on same path
Separately, the Federal Communications Commission, in a regulatory notice issued last month, said it would examine whether it should require local phone companies to allow competitors to offer advanced services over a single voice line. Public comments are due June 15 with reply comments due July 15.

Heenan said California lawmakers would be unwise to adopt a new law before the FCC weighs in on the issue. "We feel it'd be inappropriate for the state, right now, to involve itself in something the FCC is looking at," he said.

Others say that the Baby Bells would like nothing better than to stall until the DSL market takes shape.

"PacBell is trying to slow it down so that they can get enough market share before the competitors get in," said Ed Randolph, Papan's chief of staff. "What we want to do is speed up the process so some of the smaller guys can get an opportunity to get into the market."