Ruling Gives Phone Firms Power Over Internet Access
By Arshad Mohammed
Washington Post
Saturday, August 6, 2005


The Federal Communications Commission ruled yesterday that big telephone companies no longer have to lease their high-speed Internet lines to competitors, giving the companies more power over the delivery of popular fast Internet services.

The new policy raises the possibility that America Online Inc., EarthLink Inc. and the many smaller providers that do not have their own networks could ultimately lose use of digital subscriber lines (DSL) or have to pay the telephone companies more to keep offering broadband Web access.

Combined with a recent Supreme Court decision that freed cable TV companies from having to share their networks with Internet service providers, the FCC policy completes a rapid change in rules that have so far created a wide-open market with ever-shrinking prices for broadband services.  The panel agreed to delay imposing the rule for a year to lessen the impact on providers and their customers.

FCC Chairman Kevin J. Martin said it was only fair to give telephone companies the same treatment won by cable companies in the Supreme Court's June 27 "Brand X" decision, and he argued that consumers have multiple choices for broadband access.

"With the actions we take today, consumers will reap the benefits of increased Internet access competition and enjoy innovative, high-speed services at lower prices," he said.

There is lively competition among providers to lure customers with introductory broadband offers as low as $14.95 a month.  But critics say that if big cable and telephone companies are the only broadband players, they could raise prices over time.

Whether high-speed Internet prices rise or fall depends in part on the development of still other types of technology, such as the delivery of broadband over power lines, wireless networks and satellite-based systems.

"Those futuristic promises are just that -- promises," said Kenneth DeGraff, policy director for Consumers Union.

"The FCC has solidified a mano-a-mano match between . . . the cable and telephone companies," he said.  "When consumers have fewer choices, prices will rise."

Industry officials and independent analysts said that the latest decision is likely to drive many small ISPs out of business but that bigger ones, such as EarthLink and AOL, would continue to be able to lease access to DSL lines from the telephone companies, albeit at higher rates.

Broadband has become the most popular way for Americans to access the Internet.  High-speed Web surfing makes possible many of the hottest aspects of Internet culture, such as downloading music for portable music players or watching streaming video from events such as this summer's Live8 concerts.

Broadband prices have gotten low enough to attract more than half of American home Internet subscribers and have led to the decline of old-fashioned dial-up service such as that offered by AOL and EarthLink.  Those companies are transforming themselves to keep up but lack their own high-speed networks and have depended on regulated access to systems owned by others to stay competitive.

In addition to representing a victory for the telephone companies, the FCC's bipartisan, 4-0 broadband vote is something of a coup for Martin, who brought along the commission's two Democrats by compromising.

Industry analysts said the Democrats were willing to make a deal because the Brand X decision made it all but inevitable that the telephone companies would eventually get the same treatment as cable companies.

Among the compromises, the FCC postponed carrying out the broadband decision for one year to give independent ISPs time to adjust and to prevent their customers from being cut off overnight.

Separately, the commission urged Internet providers to let consumers get any content they want on the Web, provided that it's lawful.

The statement, which is not backed by any enforcement penalties, supports a demand by many high-tech firms that telephone and cable companies not use their grip on communications networks to discriminate against content or service providers.

It is not in the telephone companies' interest to cut off rival ISPs entirely, said Scott Cleland of Precursor, an independent research firm in the District that serves big institutional investors.  The phone companies have a big wholesale business selling access to their lines and are lobbying Congress for more deregulation.

"They're not going to be real heavy-handed, because it's not in their market interest," Cleland said.  "When you want more deregulation, you do not act like a monopolist."

EarthLink, which had argued against the decision, put the best face on the FCC's action.

"Today's FCC ruling effectively preserves DSL access for the next year.  Beyond that, we are confident that we will extend our existing commercial agreements," it said in a written statement.

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