Net victory could cut DSL prices

Federal regulators voted today to approve a controversial rule that could slash prices for consumer high-speed Net access.

The decision has the potential to open the floodgates of competition in the high-speed Internet market, previously dominated by the big local phone firms and cable companies. Companies like Covad Communications, NorthPoint Communications and Rhythms NetConnections have said they needed this decision to compete on price with the Bell companies in the consumer market.

Federal Communications Commission officials today decided that Baby Bell companies must allow competitors to share the main telephone line into homes to offer high-speed digital subscriber line (DSL) service. Previously, firms like Covad and Rhythms had to lease a separate line to offer their own services, raising their total cost for service. The decision, which essentially levels the playing field between the companies, is geared to further the spread of consumer broadband services.

"I think today was clearly a big win for consumers," said Jeff Blumenfeld, general counsel for Rhythms, which had previously focused solely on the business DSL market. "This makes a level playing field for us."

DSL technology allows high-speed Internet traffic as well as voice calls to travel on the same telephone line. Today, the consumer DSL market is dominated by the Bell companies, which offer services starting at an average of about $49 a month.

Competing DSL companies say the Bell companies have locked them out of the high-speed market, requiring that they lease lines to offer their own services. While the local phone companies can use a single telephone line, generally a home's primary phone line, to offer both voice and Internet services at lower costs.

The big local phone companies have tried to prevent line sharing rules, saying that technical restrictions could make splitting a single line between two providers expensive, if not difficult or even impossible. Today the Bells criticized the decision, saying it was an unnecessary move by the FCC.

"We're concerned with the order, because it adds another layer of unneeded regulation," SBC Communications spokesman Matt Miller said.

Last week, US West threatened to appeal the FCC's order in court if the decision did not allow the company to recover the costs of setting up the line sharing, a process executives said could range in the millions of dollars.

"That is going to cost a whole lot of money that I don't need to spend to use [the lines] myself," said Joe Zell, president of US West's data division, in an interview last week. "If there's not some way to recover those costs, you will see us go to court."

FCC regulators said state regulators would determine specific pricing rules.

The FCC's decision will go into effect in 30 days, but at that point the big local phone companies need to work out the technical details with their smaller competitors.

Regulators will revisit the issue in another three years, they said.