In a 3-2 vote down party lines, the FCC said local phone incumbents, such as the Baby Bells, are not required to share their telecommunications switching gear with competitors such as start-ups or long distance companies. The rules dismantle one element of the FCC's overall line-sharing rules, forcing competitors to foot part of the bill to provide local phone calling.
Since the Telecommunications Act in 1996, local phone carriers have been required to provide government-mandated discounts to lease their entire network--including copper lines, facilities and call switching equipment--to new competitors. Without the discounts on switch leasing, competitors will have to buy their own switching equipment or re-negotiate leases with the Bells.
The FCC plans to ease the transition into the new rules over the next year, setting the beginning of 2006 as its target to complete the changes. During this period, competitors will not be allowed to add new customers piggybacking on the incumbent's switches.
"This really means a competitor can no longer serve its customer by leasing the incumbent's entire network at a discount and then reselling it to a customer," said Jerry Ellig, senior research fellow at George Mason University's Mercatus Center.
In addition, the FCC said it would uphold discounted competitor access to incumbent high-capacity lines, called DS1s, that serve businesses, with the exception of densely populated urban business areas. The same rules will not apply to higher-capacity DS3 lines and unused "dark fiber" lines.
The Baby Bells applauded the FCC's decision on unbundling telecom switches from government-mandated discounts, but expressed disappointment over the requirement to share some business lines.
"The FCC has perpetuated the harmful unbundling regime for high-capacity business lines and this irrational decision does not bode well for job creation, network investment and consumer benefit," James C. Smith, senior vice president-FCC for SBC Communications, said in an e-mailed statement.