Costs of High-Speed Net Access May Drop
Federal regulators are expected today to require telephone companies to share their phone lines with rivals providing high-speed Internet services, an action aimed at bringing such services to consumers faster and at a lower cost.
The move by the Federal Communications Commission to order phone-line sharing within six months is the latest effort by exasperated Washington policymakers to bring more competition to the most critical portion of a booming telecommunications network: the last leg of the phone line from central phone offices to the nation’s homes and businesses.
Line sharing, proponents say, could save consumers up to $20 a month on their monthly high-speed Internet access bills, which can range from $59 to $79 a month. In addition, it could drastically reduce the two- to six-week wait new subscribers face for high-speed Internet service, known as digital subscriber line, experts say.
Nationwide, there are 500,000 DSL customers, most served by incumbent phone carriers such as Pacific Bell, BellSouth and US West. Another 2 million consumers get high-speed Internet access through cable TV lines, according to Forrester Research.
Fast-growing upstarts such as Rhythms NetConnections Inc. of Englewood, Colo., Covad Communications of Santa Clara, Calif., and Northpoint Communications of San Francisco are in a heated race with the Baby Bell phone companies and cable-television operators to provide customers with high-speed Internet access.
Covad is the leader in alternative DSL service with about 70,000 customers; Northpoint has 12,000, and Rhythms has about 7,000.
Wall Street has high expectations for these high-speed players: Covad’s stock has more than quintupled since the company went public at $12 a share in January, for instance. It closed up $3.63 at $65.38 Wednesday on Nasdaq.
But the high-speed data line providers say their expansion efforts have been thwarted by the unwillingness of phone carriers to share their voice lines. Local carriers, such as Pacific Bell, GTE and others, also offer DSL service.
“Line sharing is an example of taking a step in the wrong direction,” said David A. Bolger, a spokesman for the United States Telecom Assn., a Washington trade group that represents more than 200 local phone companies. “It does not provide an incentive to create an investment in your own telecommunications facilities.”
The upstart companies, he said, “are just skimming off the cream of the crop” of our phone industry customers.
But the high-speed data line providers say they are the ones at a disadvantage. These companies must go to the local phone companies to purchase voice circuits, which must be dedicated to data only. So customers who want to buy DSL from someone other than their local phone company must install a second phone line.
That cuts into the competitors’ thin profit margins--especially in serving residential users. These companies say that they earn from less than $1 to about $20 for each customer they serve, depending on the wholesale price local phone companies charge for the voice line.
“What we’ve asked the FCC to do is to charge us for data what the [local telephone companies] charge themselves, which is zero,” said Frank Paganelli, assistant general counsel at NetConnections.
While the FCC is expected to approve the line-sharing requirement, it will likely let public utility agencies continue to set pricing for the phone company equipment the service providers need.
Ordinary phone lines can transmit data at up to about 52 kilobits per second over the swiftest analog modems. About six years ago, the phone companies belatedly began marketing a somewhat faster alternative called Integrated Services Digital Network, or ISDN, which supports data transfer rates of 64 Kbps. More recently, companies have introduced other types of access, such as digital line service or DLS, which can transmit data at up to 1.5 megabits per second.
But these faster technologies have been a mixed blessing for phone companies because they cut into lucrative revenue the phone companies earn from second phone lines in homes. Because DSL and ISDN can carry both voice and data simultaneously over a single phone line, the need for a line dedicated to Internet use is eliminated. Meanwhile, many medium and small businesses can substitute lower-priced DSL service for costly T1 lines, an ultra-high-speed data line used by many corporations.
