Bell Companies, Cable Providers Face Off in Debate Over High-Speed Internet Bill

WASHINGTON – The four regional Bell telephone companies are about to get a vote in Congress on whether they can sell high-speed Internet access without letting competitors use their networks.

Legislation before the House this week would undo parts of a 1996 law that forced the Bells to open those networks to competitors at a reasonable cost. The phone companies say Internet access is a new service that requires new rules.

"With the millions of dollars that we invest to upgrade to provide a service that is a direct competitor and a similar service to cable modem, we should operate under the same rules," SBC Communications vice president Tim McKone said.

Compared to regular dial-up service, broadband Internet is nearly 2,000 times faster and can deliver a wider range of services, including high-quality video. Broadband can be provided through cable or through telephone wires that have been transformed into digital subscriber lines, or DSL.

Only 12 percent of consumers who could get broadband have signed up, though, discouraged by high prices and reports of service problems.

The bill's sponsors, Reps. Billy Tauzin, R-La., and John Dingell, D-Mich., say it will increase competition among broadband providers, boosting quality and lowering prices, and bring the service to more rural areas.

Cable providers, AT&T, consumer groups and state utility regulators say it would mean higher prices for consumers, and that the deployment of broadband is proceeding just fine without the bill.

"This bill is a proposal by the four Bell operating companies to reclaim the monopoly they had until 1996 and desperately want to reclaim in order to regain their status as monopoly providers to consumers," said Jason Oxman, vice president of broadband provider Covad.

Even under current regulations, the telephone companies -- SBC, Verizon Communications, BellSouth and Qwest -- are adding an impressive number of new customers considering the tight economic times.

SBC reported adding 146,000 DSL customers during the fourth quarter of 2001 and now has a total of 1.3 million customers. Verizon has 1.2 million DSL users, more than double its customers a year ago.

While the number of cable Internet users dwarfs those using DSL, Forrester Research estimates that the gap will narrow to 60 percent in favor of cable by 2006.

Still, McKone said, different regulations in different regions have led SBC to scale back new investments until it has "a better understanding of what the rules are."

"We are regulated by 13 different commissions as well as the FCC in how we offer this service," McKone said. "SBC will not be in a position of pumping billions of dollars into an economy where we won't know what the return will be."

The Tauzin-Dingell bill would put the Bells' Internet services almost completely beyond the regulatory control of state commissions and the Federal Communications Commission.

Consumer groups contend the bill will not help consumers.

"It will make it easier for them to raise prices," Mark Cooper of the Consumer Federation of America said of the telephone and cable companies. "The benefits of a natural duopoly are not very much greater than a natural monopoly."

Cable Internet providers are not required to provide open access to their lines, and generally face less regulatory scrutiny. They say they earned that freedom by building their own infrastructure, while phone networks were developed with the help of taxpayer dollars.

Forrester analyst David Cooperstein said the Bells had to open their lines to competitors in order to win federal deregulation of their services six years ago.

"You have some things that are unfair," he said. "It's supposed to be for the consumer's benefit, not for the corporate benefit."

Companies such as AT&T, the most outspoken of the cable giants against the bill, say the Bells are bristling at sharing their lines.

"Once competition got in, people started taking customers from the Bells," AT&T vice president Peter Jacoby said. "The Bells' response was not to compete; the Bells' response was to go legislate."

A similar bill failed to reach the House floor during the last Congress. But Tauzin spokesman Ken Johnson said the bill has enough votes to pass this year, "frankly by a wide margin."

Its prospects in the Senate are much more doubtful. Sen. Sam Brownback, R-Kan., has introduced a version there but it is opposed by Sens. Ernest Hollings, D-S.C., and John McCain, R-Ariz., the chairman and senior Republican on the committee that must first approve it.

The bill is H.R. 1542.