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FCC Gives States Power to Set Telecom Rules

In a 3-2 vote, the FCC agreed on a plan to let states decide whether to require large telephone companies, like Verizon and BellSouth Corp., to lease their telephone lines to long-distance companies, like AT&T and WorldCom Inc., at heavily discounted rates set by state regulators.

Republican commissioner Kevin Martin agreed with the panel’s two Democrats — Michael Copp and Jonathan Adelstein — on a plan to grant more authority to state public utility commissions to create competition rules.

Martin said the decision recognized that “the states are better able to make individual factual determinations about particular geographic markets than the federal regulators in Washington.”

The ruling elicited strong criticism from FCC Chairman Michael Powell, who has sought greater deregulation of the telecommunications and media sectors. Powell recommended a plan to eliminate the leasing network system in all but the most sparsely populated rural areas.

In a dissenting opinion, Powell said the decision “could prove quite harmful to consumers” and will “prove too chaotic for an already fragile telecom sector.”

Fellow Republican Kathleen Abernathy joined Powell’s dissent.

The FCC’s ruling stands as a setback to efforts by the former Bell regional telephone companies to ease some regulations of the sweeping 1996 Telecommunications Act.

The so-called Bells — BellSouth Corp., SBC Communications, Verizon Communications and Qwest Communications — have lobbied federal regulators to abolish the current network-sharing arrangement, which they say loses money and provides little incentive to upgrade their networks. SBC Communications is an underwriter of the NewsHour with Jim Lehrer.

“The FCC had a great opportunity today and blew it. Rather than bringing stability, certainty and clarity to the regulatory structure for the industry, the commission left a void and handed off the decision-making to the states,” Verizon representative Tom Tauke said in a press statement. “This is a recipe for continued disarray in the industry and more litigation.”

AT&T Corp., WorldCom Inc. and other companies, which together provide phone service to more than ten million customers nationwide, can benefit from these rules by bundling local and long-distance services into competitively priced packages, which they say compels the former Bell companies to lower their rates.

Jim Cicconi, general counsel for AT&T, said the ruling would be a boon for consumers.

“[C]onsumers will see lower prices and more choices in the marketplace, and the economy will experience more investment and greater innovation.” However, he cautioned that “the decision grants the incumbent monopolies far more deregulation than warranted.”

The former Bells did score a victory of their own during the FCC session. In another split vote, the FCC moved to ease regulations forcing the Bells to provide their competitors discount access to fiber-optic lines for high-speed broadband Internet service. The former Bell companies have argued that the rule provided little incentive for them to upgrade their current fiber-optic networks if their rivals would reap the benefits.

This decision, which Powell applauded, means telecom companies cannot be required to share any new high-speed communications networks. The rule is intended to promote greater investment in building new fiber-optic networks capable of delivering video on demand and other new services.

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