New FCC Ruling Could Lower Cost Of Internet Access

The U.S. Federal Communications Commission (FCC) gave Internet surfers a shot in the arm yesterday by voting to require major local phone companies to share their lines with data carriers.

The move is designed to hasten the spread of high-speed Internet access into the consumer market by making access to Digital Subscriber Lines (DSL) more affordable.

“This is one of the most significant rulings the FCC will make in the competitive local exchange space this year. It’s going to dramatically change the landscape of how we provide DSL or high-speed access to the Internet on a consumer level,” Covad Communications chief financial officer Tim Laehy said.

A Leg Up

Currently, local telephone companies, such as the regional Bells and GTE, offer high-speed Internet services to subscribers on the regular voice lines — giving them a distinct advantage over other Internet service providers.

Until this ruling, outside companies had to buy a second line from the telephone company in order to sell high-speed Internet connections to households.

That arrangement meant that businesses who were competing with the local phone companies were forced to pay an additional $20 (US$) to $23 for each second line. It also meant that most companies chose to stay out of the DSL market because they simply couldn’t compete.

However, the line sharing that will be forced by this ruling is expected to dramatically reduce the monthly fees to these other service providers — thus making broadband Internet access more affordable. The ruling is also expected to motivate more companies to become providers, because they will finally be competing on an even playing field.

Unhappy Baby Bells Voice Concerns

Predictably, phone companies vehemently oppose the ruling. The companies claim that the decision is unnecessary and contrary to the tenets of a free market economy.

“There is no need for corporate welfare that gives one sector of a very competitive industry an unnecessary advantage,” said Bruce Posey, senior vice president of US West.

Local telephone companies have also weighed in against the ruling, saying that it will make it difficult to determine who is responsible for fixing a telephone line if it goes down.

However, most industry observers feel that the ruling was inevitable, considering the burgeoning growth of the Internet and e-commerce and the current lack of broadband connections.

The FCC requirement will go into effect 30 days after it is published in the Federal Register. At that point, competing companies will then have to hammer out pricing agreements for the cost of splitting the line.

According to Pacific Crest Securities analyst Brent Bracelin, the FCC plans to issue specific pricing guidelines for line-sharing services next week.

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