FCC May Let Bells Offer Data Long-Distance

The Federal Communications Commission on Thursday will consider a proposal that could allow regional Bell companies to provide in-state long-distance services before they open their local markets to rivals as required by law.

The plan would allow five Bell operating companies to offer in-state long-distance data services as long as they do so through a separate affiliate. Competitors say such a ruling would be a de facto green light to local carriers to also begin offering voice services over the in-state data networks.

“How are you going to really be able to monitor this--particularly in a state like California, which has 20% of the nation’s access lines--to make sure it’s simply data service?” said Russell Frisby, president of the Competitive Telecom Assn., a trade group that represents long-distance carriers.

Regulators are responding to pressure from the Baby Bells to relax local calling boundaries. The Bells argue that these 15-year-old boundaries interfere with their plans to provide high-speed data networks to their customers.

Local carriers are barred from providing voice and data services across local calling boundaries until they prove to regulators that they have opened their markets to competition. Instead, they hand off such data to other carriers.

The 1996 Telecommunications Act requires the FCC to review the progress that regional Bells are making on their advanced telecommunications networks. The agency hopes that the relaxing of local calling boundaries will provide an incentive for local carriers to speed introduction of such services.

“The act does give us some leeway to modify boundaries,” said Tom Power, a legal advisor to FCC Chairman William Kennard. “It’s pretty clear we can’t modify the boundaries in such a way as to defeat other provisions of the act. So the question is how much of a modification is consistent with the fact that Congress didn’t want the Bells to get into long-distance before they open up their local markets.”

Local carriers are in a race with cable companies and long-distance providers to complete broad-band networks that will allow them to offer high-speed Internet access to residential and business customers. The FCC ruling could be especially important to Californians, who already have several options for high-speed access, including digital subscriber line and cable modem services.

SBC Communications announced last week that it was speeding up its deployment of digital subscriber line service in California and other areas. But overall, regional carriers have been slow to build broad-band networks.

“In some respects, there hasn’t been enough progress on advanced data networks,” said Gail Jones, a senior telecom analyst for the Yankee Group, a Boston-based market research firm. “SBC, US West and Bell Atlantic are doing it, but we haven’t seen it on a wide-scale basis. The Baby Bells are afraid it will cannibalize their existing product lines.”

Firms that compete with the Bells are upset about a provision in the proposal that would relieve the Bells of a requirement to give competitors access to networks operated through separate subsidiaries. Many of these competitors are much further along on their advanced networks than the local Bells are, but they need access to the Bell networks to finish them.

“Most competitive local exchange carriers need to have access to the telephone companies’ facilities to provide almost all of their services,” said John Windhausen, president of the Assn. for Local Telecom Services. “The FCC is proposing to allow a telephone company to put a certain portion of their network equipment in this separate subsidiary where the competitor can’t get access to it. This could harm competition and the number of services that are available to consumers today.”

Part of the draft FCC order could benefit these competitors, however, because it would require the Bells to give them access to certain connections and allow them to place their switching equipment in the local carrier’s facility.

The Bells say they want the FCC to ease local calling boundaries without requiring them to form separate subsidiaries. Setting up such affiliates would be costly and require them to raise rates, they say.

Regardless of the FCC’s ruling this week, analysts and regulators agree that local calling boundaries will eventually need to be discarded to allow full-blown competition. Regulators drew up the boundaries when AT&T; was broken up in 1984, to carve out specific service areas for the parent company and its seven offspring.

“As a policy matter, everyone agrees these boundaries will outlive their usefulness,” Power said. “The question is when.”

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Times staff writer Jennifer Oldham can be reached via e-mail at jennifer.oldham@latimes.com.