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FCC could spur speedy Net

The agency is considering a deregulation plan to allow large telcos to more easily enter the growing market for fast Internet access.

In a move to boost the deployment of high-speed Net access, the Federal Communications Commission is considering a deregulation plan to allow large phone companies to more easily enter the growing market.

Under the plan, Baby Bells (known as regional Bell operating companies, or RBOCs) would be able set up high-speed data service subsidiaries that would act as separate business entities. The subsidiaries would be able to compete in the broadband market with little regulation, according to FCC officials.

As mandated by the Telecommunications Act of 1996, the Bells would have to open their local phone loops to data service and long distance competitors.

But under the proposal, the subsidiaries would not have to do the same: They would not have to share access to their technology. By the same token, they also would have to pay the same rates as other independent competitors for access to the local loop, meaning they would not get a break from their parent companies on these costs.

The FCC says the plan would help level the playing field among the large phone and long distance companies and the new generation of providers in the expanding broadband market that includes technologies such as DSL (digital subscriber line) or cable Net access.

The overriding benefit of the proposal, according to agency officials, is that it would give Baby Bells an incentive to offer high-speed Net access and upgrade their local switch centers: With less regulation the subsidiaries would be able to sell retail services at any price they chose, and would not have to share their new packet-switching technologies and investments with competitors at wholesale costs.

Consumers also could benefit from the plan through lower prices, FCC officials added. Since all high-speed access companies--including the Baby Bell subsidiaries--would have the same access at the same price as the local switch centers, they would compete with each other equally. And the competition with each other would naturally drive down prices, officials said.

"The RBOCs have said, 'Why would we invest in this new equipment if we have to turn around and give it to our competitors at cost?'" an FCC official said today.

"The key to making this work is that they can't use their existing network in a way to disadvantage their competitors," he added. "When [the subsidiaries] need access to the loops, they will have to stand in the same line as the competitor. Whatever the loop affiliate gives to the subsidiary, they have to give to everyone else."

The FCC also would play a role in regulating Baby Bells to ensure they charged their data subsidiaries the same as every company that wanted access to the local loop.

PC chipmakers and cable Net access providers have argued separately from this issue that telephone carriers have stifled the growth of high-speed bandwidth technologies by not upgrading their local switch centers to handle increased data traffic--thus making those industries' advances less useful.

However, telcos have argued that the costs are too high for them to make those upgrades alone.

The proposed FCC rules are expected to be submitted to the commission by staff today, as first reported by the New York Times. In August, the FCC is expected to vote on whether to proceed with the rules. They would then be open for public debate for six months.

FCC chairman William Kennard supports the plan, which is likely to draw waves of protest from the nation's big long distance carriers and from new local phone companies, according to the newspaper.

"If they want regulatory relief they have to do it through an affiliate," another FCC official told CNET NEWS.COM. "I think it makes a lot of sense. This is the best way to ensure competition. We want the incumbent local phone companies to enter this market because they have a lot of assets and experience, but we don't want them there in a way that would discriminate against new entrants."