McCain Would Widen Bells Data Reach

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Washington -- Claiming that the cable industry holds unfair
regulatory advantages, Senate Commerce Committee chairman John McCain (R-Ariz.) introduced
legislation that would deregulate Baby Bell provision of Internet services to residential
and business users.

The bill -- introduced May 13 as part of McCain's
larger plan to overhaul the Telecommunications Act of 1996 -- would bar the Federal
Communications Commission from requiring the Baby Bells to meet a 14-point checklist
before they could provide long-distance data services.

"This legislation will make the Internet more
accessible and less expensive by stripping away counterproductive federal
regulations," U S West chairman and CEO Solomon Trujillo said in a statement released
May 14.

U S West -- which announced plans to merge with Global
Crossing Ltd. last week -- is the Baby Bell that serves 14 Western and Rocky Mountain
states, including McCain's home state of Arizona.

McCain's bill (S. 1043) would also exempt the Bells
from having to lease and resell their advanced data services to competitors. But those
requirements would remain for voice-only services.

The Bells have often complained that FCC resale and
unbundling requirements were financial disincentives to their building advanced data

"If the Internet is deregulated in the manner Sen.
McCain is suggesting, U S West will be able to provide high-speed Internet services to an
additional 2 million households and businesses throughout our region during the first year
alone," Trujillo said.

The bill would ensure that states have no jurisdiction over
the Internet by declaring that Internet-service providers are engaged in interstate

David J. Markey, vice president of governmental affairs for
BellSouth Corp., a nine-state Baby Bell, said McCain's bill would provide much needed

"We continue to believe that overregulation is a much
greater problem than too little regulation in this emerging marketplace," Markey
said. "This legislation would give local phone companies the freedom to compete
effectively as we build advanced networks."

In his statement, McCain argued that cable had regulatory
advantages over local phone companies that ought to be removed.

"This is blatantly unfair to the telephone
companies," he said.

McCain also criticized cable's Internet strategy as
one that limits consumer choice, as cable-modem users would have to pay extra in order to
access ISPs other than the one provided by the cable operator.

"Although [AT&T Broadband & Internet
Services'] cable customers can access [America Online Inc.] or other Internet-service
providers of their own choice, they must first pass through, and pay for, AT&T's
own Internet-service provider, @Home [Network]," McCain said.

"The fact that it typically costs around $500 per year
to subscribe to @Home is a big disincentive to paying even more to access another service
provider," he added.

Consistent with his previous statements, McCain's bill
did not include provisions that would require cable operators to unbundle high-speed
transport from ISPs.

By contrast, House legislation (H.R. 1685 and 1686)
introduced three weeks ago would allow AOL, for example, to file an antitrust suit against
a cable operator with market power that discriminated against unaffiliated ISPs.

"We're still studying the [McCain] bill. But we
are pleased that chairman McCain is pursuing a pro-competitive approach, rather than a
regulatory approach, regarding cable's broadband deployment," National Cable
Television Association spokesman Scott Broyles said.

Broyles added that the NCTA had no recommendations
"about how local phone companies' advanced services should be regulated."

McCain was among a handful of senators who voted against
the Telecommunications Act of 1996, and he has offered several bills designed to chip away
at its imperfections.

In reaction to the FCC's unwillingness to allow Baby
Bells into long-distance services, McCain introduced a bill last year (S. 1766) that would
have opened the long-distance market -- including voice calls -- to the Bells one year
after the date of enactment.

With regard to McCain's new bill, telecommunications
analyst Scott Cleland said McCain would likely encounter resistance from Sen. Ernest
Hollings (D-S.C.), who is less enthusiastic about amending the three-year-old law for the
benefit of the Baby Bells.

Cleland, managing director of Legg Mason Wood Walker's
Precursor Group, said McCain is likely using the bill to tell the FCC that he is
displeased with the agency's implementation of the 1996 law.

"This is a significant legislative signal to the FCC
-- that's about it," Cleland added.