Baby Bells Push to Ease Access to High-Speed Internet Market

Former regional Baby Bell phone companies got a cool reception Wednesday as they renewed their assault on a 1996 law they say makes it harder to compete with cable operators in offering high-speed Internet service.

The telephone giants, such as SBC Communications Inc. and Verizon Communications Inc., are pushing for legislation to amend the 1996 Telecommunications Act and allow them to offer high-speed Internet services--also known as broadband or digital subscriber lines--without first opening their local telephone markets to competition.

The 1996 law prohibits Bells from offering long-distance service in their home turf until they open local markets to rivals. Because Internet traffic relies heavily on long-distance lines, Bells have had to pass off Internet traffic to long-distance rivals rather than keep the business for themselves.

Under the bill, HR 1542, Bells could offer data and Internet services across long-distance lines without giving up their local monopolies, but would still need government approval before offering voice traffic on long-distance lines.

“Broadband is a nascent market that does not need regulation,” said Rep. W.J. “Billy” Tauzin (R-La.), sponsor of the bill and a longtime supporter of the Bell companies. Tauzin also is chairman of the House Energy and Commerce Committee, where the bill was debated Wednesday.

Both sides of the issue warn that the wrong outcome could dramatically slow the roll-out of high-speed Internet service, now delivered to only about 6% of U.S. households.

Without the bill, the Bells say they have little financial incentive to upgrade their systems and cannot compete with cable operators, which control more than 70% of the high-speed Internet market.

Opponents say the bill would drive Bell rivals out of business and remove the very competition that spurred Bells to jump into the Internet market in the first place.

“It’s a competition killer,” said Rep. Edward J. Markey (D-Mass.). He said the bill is unnecessary because Bells already have the ability to offer comprehensive high-speed Internet service across long-distance lines by agreeing to open up their local telephone monopolies, which was a primary goal of the 1996 act.

“The key to entering the long-distance market is in their own hands,” Markey said.

Bells have won approval to offer long-distance service in five states, with additional approvals expected in coming months.

But officials at AT&T; Corp. warned that Bells might abandon efforts to open local telephone markets if they are allowed to offer data and Internet services because that business is more promising and lucrative than the market for long-distance telephone calls, where prices and profits are falling.

“This bill would leave little incentive for [the Bells] to open their local market,” said James W. Cicconi, general counsel at AT&T.;

Bell officials said AT&T;, a major cable operator, is simply trying to prevent them from creating a level playing field in the market for high-speed service.

In addition to the long-distance restriction, Bells complain they must lease their telephone lines to rivals at wholesale prices. Cable operators do not face similar requirements. The bill also would eliminate the requirement that Bells share their lines with rival Internet providers.

“The same services in the same market should be regulated in the same way,” said Paul K. Mancini, vice president at SBC Communications, a major Bell company.

Rep. John D. Dingell (D-Mich.), a co-sponsor of Tauzin’s bill, said it would benefit consumers. “This will stimulate the cable industry to provide better service at a lower cost,” Dingell said.

But other lawmakers worried about the struggling telecommunications start-ups spawned by the 1996 act to compete against the Bells. “This bill effectively eliminates those competitors,” said Rep. Anna G. Eshoo (D-Atherton).

Charles McMinn, chairman of Covad Communications Group Inc., one of the last surviving companies offering high-speed Internet service in competition with the Bells, said he would be forced to abandon 55,000 residential customers if the bill were passed.

Analysts said the legislation might clear the House but would face tough sledding in the Senate.