May 9, 2006 2:34 PM PDT

EarthLink: Bells must share broadband networks

WASHINGTON--Federal regulators acted illegally by not forcing the Bell companies to share their broadband networks with competitors, EarthLink told a federal appeals court on Tuesday.

The 20-minute oral arguments before the U.S. Court of Appeals for the D.C. Circuit dealt with a legal challenge filed last year by the Atlanta-based Internet service provider against the Federal Communications Commission.

The suit was prompted by the FCC's 2004 decision to exempt Verizon, BellSouth, Qwest and what was then SBC Communications from a portion of a 1996 federal telecommunications law that generally requires such incumbent carriers to "unbundle," or share, certain broadband elements of their networks with potential new competitors.

The law allows the FCC to grant "forbearance" from those requirements if it determines that governmental intervention isn't needed to ensure "just, reasonable, and nondiscriminatory charges and practices," to protect consumers and to promote the public interest. Regulators are supposed to weigh the state of competition in the marketplace before coming to that conclusion.

EarthLink lawyer Mark O'Connor built his arguments around the idea that federal regulators "failed to analyze the state of broadband in a rational manner." He said the FCC ignored the market analysis techniques suggested by federal law and, as a result, "unlawfully eradicated the rights of broadband competitors to serve the public."

O'Connor also charged that the broadband market today is nothing more than a duopoly run by the Bells and cable companies and suggested a higher standard should be in place before exempting the Bells from their legal requirements.

Judge David Sentelle, part of a three-judge panel that stayed mostly quiet during both sides' arguments indicated that EarthLink's arguments may be on shaky legal ground, concluding that federal law "mandates in no fashion what sort of (market) analysis is necessary...."

The same appeals court ruled two years ago that regulators were justified in saying that big phone companies would not have to share their new advanced broadband networks with potential competitors.

In this case, the FCC found that because of the cable companies' clear broadband market dominance, the government need not impose "unbundling" requirements on the Bells. The Bells' "limited competitive advantage," according to the FCC's brief, was already enough to establish an appropriate pricing structure in hopes of luring their own customer base.

"It is not only unnecessary to require unbundling, it is affirmatively harmful," FCC lawyer Nandan Joshi told the judges.

A government mandate that the Bells share their networks "harms competition...because it discourages competitors from investing in their own technologies," Joshi added.

Joshi argued that the price of broadband services has steadily declined since the FCC granted forbearance to the Bells. In his rebuttal, O'Connor argued there was no "causal connection" between the two phenomena. He also said there was "no evidence" that the Bell companies were actually offering access to their infrastructure at "just and reasonable rates."

A ruling in the case is expected during the next few months.

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Bell company, broadband network, EarthLink Inc., appeals court, broadband

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EarthLink, GE fund broadband over power line provider
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