By: Mark Wigfield
Dow Jones Newswires
WASHINGTON -- A three-year effort by Rep. Billy Tauzin (R., La.) to win passage of a bill that would deregulate high-speed Internet services offered by the Baby Bells paid off with House approval Wednesday.
But the bill faces poor prospects in the Senate, where the chairman of the Senate Commerce Committee, Ernest Hollings (D., S.C. ) has promised to bottle up a measure he strongly opposes. He has bipartisan support for that position.
Still, the general notion behind the bill -- that regulation tends to slow the rollout of broadband services -- is one that has gained currency among policymakers over the course of the debate.
The Federal Communications Commission is currently considering rules that would redefine broadband as an "information service" rather than a telecommunications service. That would relieve the Bells of what they say are the most onerous requirements of current regulation: that they must lease to competitors advanced network elements, including high-speed fiber connections, at cut-rate prices.
The FCC is months away from a final conclusion. But Chairman Michael Powell has said the arena for competition may be between cable, wireless and telephone lines, not just over the phone line itself.
Even the most vociferous opponents to the bill admit they're swimming upstream.
The idea that regulation is inhibiting widespread deployment of broadband " unfortunately is gaining currency and it's wrong," said Russell Frisby, president of CompTel, a group that represents competitive data services providers that lease network elements from the Bells. "The Bells have not invested in new broadband technology on their own," he added. "They only invested when they had competition."
But while the bill is unlikely to become law, the troubled competitive local exchange carriers were concerned about the signal passage sends to investors, who have fled from the industry. While the bill did make concessions to the CLEC industry, the concessions will have no effect unless the bill itself becomes law.
Among the concessions was a legal clarification that antitrust law applies to the telecommunications industry. A court decision had muddied that issue, raising new hurdles on what some companies think is the most promising venue for the CLECs to contest what they see as anticompetitive behavior by the Bells.
The bill also would increase to $10 million per violation from $1.2 million the allowable penalties against Baby Bells who fail to interconnect with competitors as required.
The United States Telecom Association applauded the House's 273-157 vote of approval. The association represents Baby Bells SBC Communications (NYSE: SBC - news) Inc. (SBC), Verizon Communications (NYSE: VZ - news) Inc. (VZ) and BellSouth Corp. (NYSE: BLS - news) (BLS), as well as hundreds of small incumbent local-telephone companies.
"With this vote today, House members took a giant step forward toward economic recovery, increased innovation and expanded consumer choice," said the group's president, Walter B. McCormick Jr. "The House vote illustrates the momentum that is building across the nation to increase the deployment of high-speed Internet services."
The bill garnered support from labor unions, whose members are more likely to work for a Baby Bell than a CLEC. The Bells also tend to have strong support in the House because of the companies' strong presence in many congressional districts.
But the legislation is opposed by state regulators and the National Governor's Association. They said it strips states of the ability to regulate prices and provide other consumer protections.
Mark Cooper of the Consumer Federation of America saw it as a special-interest triumph for the Baby Bells. "Today's vote was a victory for special interest over the public interest, of campaign dollars over common sense," he said in a statement. The House "caved under intense lobbying by allowing the Bell monopolies to construct this roadblock to the high-speed lanes of the information highway."
But both sides lobbied heavily. According to the Center for Responsive Politics, the political action committees of AT&T Corp. (NYSE: T - news) (T), Sprint Corp. (NYSE: FON - news) (FON) and WorldCom Inc. (NasdaqNM: WCOM - news) (WCOM) have contributed $12.6 million to federal campaigns since 1999, while the Baby Bells have contributed $19.4 million.
Write to Mark Wigfield at mark.wigfield@dowjones.com
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