The Federal Communications Commission handed down a decision yesterday that could mean more competition among local phone providers, less competition in the broadband sector, and a deterioration of Chairman Michael Powell's influence.
Last month, Powell proposed that the Baby Bells -- Verizon
The problem for Powell, however, is he never had the full backing of his colleagues. Unable to sway fellow Republican Kevin Martin, Powell was forced to dissent on an alternative proposal that passed by a 3-2 vote. (Martin's vote prompted an embarrassingly melodramatic response from Rep. Billy Tauzin (R-La.), who accused him of being a "renegade" leading a "palace coup.")
But while the new ruling still requires low-cost rental of voice lines (or at least keeps the power to decide in states' hands), the Baby Bells will not have to share as much of their broadband data networks. That caused shares of Covad Communications
The implications of the ruling are far-reaching. Allowing outside companies to rent voice lines would keep downward pressure on prices for your local phone service. But that puts downward pressure on the Baby Bells' margins and might keep them from expanding their networks and adding new broadband services. Less incentive to build out means less business for telecom equipment providers. And with less competition in the broadband arena, DSL prices might rise, which, in turn, could allow cable Internet prices to rise.
To top it all off, the ruling will almost certainly be challenged in court, creating a climate of uncertainty for at least the next couple of years.