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New bill would block Bells

In response to an effort by House heavyweights to deregulate DSL service by Bell companies, another group of House members introduced legislation to block Bell data expansion.

WASHINGTON--The Bell companies are finding themselves in a tug-of-war in the House over how much power they should be allowed to wield in broadband.

A linked pair of bipartisan bills were unveiled Thursday by their sponsors--Reps. Chris Cannon, R-Utah, and John Conyers, D-Mich.,--that would prohibit Bells from entering the long-distance market in data services and boost the penalties those companies would pay under the 1996 Telecom Act for failing to open their networks to competitors such as Covad Communications. The bill is a direct response to one introduced last week by the top members of the House Commerce Committee, Reps. Billy Tauzin, R-La., and John Dingell, D-Mich., that was approved April 26 in the committee's Telecommunications Subcommittee. see special report: Digital Darwinism

The last two weeks have seen a wide-ranging debate erupt in Washington over what extent Congress should intervene to spur broadband competition and extend such offerings to rural and underserved areas. The debate involves just about every conceivable telecommunications industry--incumbent local exchange carriers, competitive local exchange carriers (CLECs), competitive DSL providers, cable broadband providers--even hardware and chip manufacturers--and the most direct result so far has been a slowdown in the movement of the Tauzin-Dingell bill. That legislation, an attempt to deregulate Bells in their handling of data traffic, was expected to be approved in a full Commerce Committee vote this week, but the committee has yet to meet on the legislation.

"We don't need to do special favors for monopolies," Conyers said Thursday in reference to Tauzin-Dingell. "We need more competition, more innovation and lower prices in this emerging, exciting broadband market." He added, "I don't have anything against the Bell companies. SBC-Ameritech serves my constituents well."

The bill has several distinct points that contrast with Tauzin-Dingell:

•  Bells would remain prohibited from entering the long-distance market in data or voice until meeting the market-opening requirements of the Telecom Act, something that so far has occurred in Kansas, Massachusetts, New York, Oklahoma and Texas.

•  Broadband competitors would be free to connect with Bell company DSL-related equipment as long as Bells held more than 85 percent of the local phone market. This is a key provision, as the Bells currently have about 97 percent of the local residential phone market, and Tauzin-Dingell would free Bells from any DSL-related interconnection obligations.

•  Fines on Bells would be increased for failure to permit interconnection--something that was also added to the Tauzin-Dingell bill as an amendment last week--and would create a streamlined dispute resolution process for Bells and their competitors.

•  Much like some other bills introduced this Congress, there would be various financial incentives to encourage broadband deployment in rural and underserved areas. The highlight of this section is an appropriation of $3 billion over 5 years to offer loans or loan guarantees to broadband providers.

The Bells have argued vociferously that they need the ability to provide data over long distances so they can avoid handing off Internet traffic to other backbone providers and gain the economies of scale necessary to extend DSL to underserved areas. They were quick to criticize the Cannon-Conyers legislation.

"This legislation moves the telecommunications industry backwards," said Tim McKone, vice president for congressional affairs for SBC Communications. "It relies more on red tape and regulation instead of competition."

Tauzin-Dingell opponents rally
Even as Cannon and Conyers sought to focus attention on their legislation, their allies in Washington seemed to still have their guns squarely aimed at Tauzin-Dingell.

That bill "would reward the Bell monopolies for their anti-competitive behavior," said Steve Ricchetti, co-chairman of Voices for Choices, a coalition that includes AT&T, Covad, Winstar Communications, WorldCom and XO Communications. (Sprint also endorsed the Cannon-Conyers bill.) Trade groups belonging to the coalition include the Association for Local Telecommunications Services (ALTS), Commercial Internet eXchange (CIX), the Competitive Telecommunications Association (CompTel) and Computing Technology Industry Association (CompTIA).

Consumer groups such as the Consumer Federation of America have also lined up in opposition to Tauzin-Dingell and in favor of Cannon-Conyers.

Cannon-Conyers is a "significant improvement" over Tauzin-Dingell, Consumers Union Washington Co-Director Gene Kimmelman said. By focusing on resolving interconnection disputes and raising fines, "this legislation offers consumers a much better chance of seeing local markets open to competition than either the Tauzin-Dingell bill or the status quo."

Tauzin-Dingell has the advantage of being sponsored by the top members of the House Commerce Committee. However, House Judiciary Committee Chairman James Sensebrenner, R-Wis., has concerns about the bill and is seeking to have it reviewed in his committee as well out of antitrust concerns. Cannon and Conyers both sit on the Judiciary Committee, and Conyers is the highest-ranking Democrat there, so they could have a say at the committee level on Tauzin-Dingell's future.

"I hope our friends on the Commerce Committee will come to recognize that increased deployment of broadband will come not from unleashing monopolies but instead by supporting competition," Cannon said.

FCC stays out of it
The FCC under Chairman Michael Powell has been all but silent on the issue of governmental intervention in the broadband market. At a recent House Commerce Committee hearing Tauzin and Dingell both tried to persuade Powell to at least implicitly endorse his legislation but he declined.

When asked at his initial press conference if the FCC should be concerned about the failure of so many CLECs, including those offering data services, Powell said "some of it is poor implementation, some of it is poor execution."

His reticence is shared at the commission by at least one of his Republican colleagues.

"There's been a broad failure in that sector," Commissioner Harold Furchtgott-Roth said Thursday in a meeting with reporters. "Some have been heavily regulated but some others, such as the dot-coms, have not."

"In a competitive market life is very tough," he said. "Businesses fail all the time."