BellSouth’s Call

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Washington— Call it a case of policy envy.

For decades, the Baby Bells have been required to offer nondiscriminatory access to Internet-service providers, a Federal Communications Commission policy critical to the success of America Online Inc. in the narrowband dial-up world.

Today, BellSouth Corp. is calling for repeal of the open-access policy for broadband on the basis that market conditions do not justify it — especially because cable operators, not phone companies, serve more high-speed access customers than anyone else.

Two weeks ago, BellSouth formally asked the FCC for the policy change.

COSTLY AND UNFAIR

The agency proposed doing just that a few years ago, but the effort stalled when the FCC’s plan to keep cable’s data pipeline closed was shot down in court.

BellSouth, the Southeast’s dominant Baby Bell, said that compliance with the open-access rule was not only costly, but also unfair, because market-leading cable companies can discriminate against competing ISPs.

Most cable companies do not have agreements with several third-party ISPs. Time Warner Cable is an exception. It has to comply with open-access requirements mandated by the Federal Trade Commission to gain approval for the Time Warner Inc.-America Online Inc. merger in 2000, but that order expires in 13 months.

BellSouth’s request came in an Oct. 27 filing with the FCC that no other Bell company joined.

“If consumers do not need the majority providers to open their lines to independent ISPs in order to ensure just, reasonable and nondiscriminatory rates and practices, it cannot possibly be the case that it is necessary that the minority providers open their lines to ensure the same thing,” BellSouth said.

As of June 2004, cable had 16.9 million high-speed data customers while phone companies had 11.3 million, according to FCC data cited in BellSouth’s filing.

With regard to financial burdens, BellSouth said complying with FCC rules costs $3.50 per month, per customer.

“Those expenses translate directly into higher costs for consumers,” BellSouth said.

EarthLink, an Atlanta-based ISP with no facilities leading to homes, has 1.3 million broadband customers who connect to the service over cable and phone high-speed data lines. BellSouth’s request would, if adopted, eliminate EarthLink’s right to purchase wholesale access at the same rates that BellSouth charges itself.

“We think this request is over the top and don’t expect that the FCC would grant this relief,” said David Baker, EarthLink’s vice president of law and public policy.

In its petition, BellSouth said it would not use a favorable decision to discriminate against competing ISPs.

“BellSouth has hundreds of ISP customers and has no desire to lose the revenue created by their use of BellSouth’s broadband transmission,” the telco said.

NO DISCRIMINATION

Consumer Federation of America research director Mark Cooper said his group would oppose BellSouth at the appropriate time. The CFA and other consumer groups have unsuccessfully urged the FCC to apply the same open-access rules to cable.

“BellSouth clearly wants to be done with nondiscrimination entirely,” Cooper said.

The National Cable & Telecommunications Association declined comment. The U.S. Justice Department is asking the U.S. Supreme Court to review a lower court decision that could expose cable to open-access requirements.

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