FCC Deregulates DSL

In early August FCC commissioners agreed to deregulate DSL access a move that was foreshadowed just weeks earlier when the Supreme Court ruled against Brand X Internet LLC, freeing cable companies from network-sharing requirements sought by the ISP.

In a widely anticipated move, the FCC on Aug. 5 reclassified wireline broadband providers as information services. Under previous rules, DSL was considered a telecommunications service, which meant providers had to open their high-speed networks to other ISPs on nondiscriminatory terms, and follow other common carrier rules.

Commissioners built on, and cited, the Supreme Courts Brand X decision in late June that let the cable TV industry deregulate its high-speed networks. Republican Commissioner Kathleen Abernathy and FCC Chairman Kevin Martin praised the DSL reclassification, while Democrats Michael Copps and Jonathan Adelstein lent their support despite reservations.

DSL will be reclassified whether I agree or whether I dont agree, Copps said, calling the order far from ideal. He said the item garnered his endorsement only after it assured protection of Homeland Security measures, continued RBOCs contributions to the Universal Service Fund (USF), prohibited discrimination against smaller providers, and supported disabled Americans access to highspeed Internet services. Adelstein pointed to those same elements as clinching his support, as well.

Both Copps and Adelstein warned against the RBOCs using the reclassification as justification to block competitors VoIP traffic, or consumer access to certain sites and services.

At press time, the official text detailing the orders changes and impacts had yet to be published in the Federal Register.

The FCC commissioners did say the reclassification establishes a one-year transition period, allowing ISPs to broker deals for access to the RBOCs networks. After this period, according to the commissioners, consumers will have more DSL providers from which to choose, lower prices and access to higher speeds.

While the FCC contends consumers will win, analysts say the move puts independent providers on notice. This is a big hit on independent ISPs, says Stefano Nicoletti, service manager for analyst firm Ovum. They have to completely re-think their business and their role in todays U.S. broadband market.

The FCCs overriding belief is that there is no need to grant access in a multiplatform world, because consumers can choose in between different facilities-based broadband providers deploying different and competing technologies, says Nicoletti. Close to six broadband connections out of 10 in the U.S. are provided through cable, while DSL covers the rest, and overall broadband penetration is 12 percent.

Another impact of the FCCs decision is its effect on the Universal Service Fund, says Medley Global Advisors Analyst Jessica Zufolo. Martin has set the wheels in motion for reform to take place, she says. Specifically, the FCC wants to change the way the funds fees are collected and distributed. Instead of relying solely on carriers that offer interstate, international and interexchange services because that base is shrinking the FCC could require all providers to contribute to the USF, Zufolo says.

[T]heyre trying to figure out a way to keep the fund sustainable, she says, explaining that one method is to tie contributions to user telephone numbers.

The ruling also updated Communications Assistance for Law Enforcement Act (CALEA) rules by requiring providers to open their DSL networks to law enforcement wire taps. This would put DSL services in compliance with CALEA rules already in place for other telecommunications services.

Meanwhile, the Bell companies hailed the FCC decision as matching regulations with 21st-century technologies. Representatives for Verizon Communications Inc., SBC Communications Inc. and BellSouth Corp all praised the move as good for consumers and job growth. Industry associations including USTelecom, the Telecommunications Industry Association (TIA), and the National Cable & Telecommunications Association (NCTA), each said the FCC had made way for workable rules for all providers and promoted better competitive practices.

On the other hand, the CLEC community was uncharacteristically quiet on the issue. According to the FCC, [the] action has no impact on CompTels carrier members, explained Earl Comstock, president and CEO of CompTel, in a news release. CompTel appreciates in particular that the final order will include measures to ensure continued competitive access to facilities and provides a transition period for ISP access and USF funding. … CompTel remains concerned that the regulatory classification decisions in this order will ultimately frustrate the [c]ommissions stated goals and result in less innovation, higher prices and fewer jobs for Americans.

Companies that buy DSL from the Bells companies including Covad Communications Group Inc. and New Edge Networks said they were unable to give their full opinions on the notice of proposed rulemaking until they could read the order in the Federal Register. Covad maintained it will continue providing DSL services to carriers because it offers a national alternative broadband network to ISPs and VoIP providers.

New Edge Networks Dan Moffat, president and CEO, said the FCCs DSL deregulation came as no surprise to the carriers carrier, which has been repositioning its BigFoot DSL coverage in expectation of this very decision.