FCC chief speaks out on mergers, RBOC data services

By David Rohde
Network World, 01/07/99

Federal Communications Commission Chairman William Kennard indicated Thursday that he probably will approve the merger between AT&T and Tele-Communications, Inc. if the two companies can convince him that both consumers and businesses can benefit.

But he seemed less comfortable with two pending mergers involving regional Bell operating companies. And he appeared to throw cold water on a joint proposal between RBOCs and computer manufacturers to essentially end regulation of RBOC data services to encourage digital subscriber line deployment.

In a press conference to outline his 1999 goals, Kennard said the pending AT&T-TCI combination is one of the first mergers that seem to comply with the spirit of telecom reform.

"That has the prospect of being a very exciting transaction," Kennard said. Marrying cable lines with two-way telephony switching systems is "just what Congress anticipated in the Telecommunications Act of 1996," he added. "That's what the promise of the AT&T-TCI merger is about."

Kennard didn't give the two companies a free pass. He said he is insisting on a reasonable timetable for when the merged company will deliver Internet access and other advanced services to all sectors of society. FCC staffers later said AT&T and the FCC have not yet come to an agreement on such a schedule.

The Department of Justice last month approved the AT&T-TCI deal, setting off a round of general press congratulations. But the Justice Department only ruled that the combination doesn't violate general antitrust rules, while the FCC gets to say whether the combined company must open its network to competitors under communications law. AT&T has warned that the deal is off if it comes with too many regulatory conditions.

Kennard was much less enthusiastic about the two pending mergers involving RBOCs - SBC Communications with Ameritech, and Bell Atlantic with nationwide incumbent local carrier GTE.

Kennard didn't tip his hand as to how he would vote on the deals, except to say he expects the five-member commission to decide in the first half of 1999. But he criticized the notion that only bigger companies have the resources to invest in high-bandwidth local networks.

He expressed doubt about a recent proposal from GTE and four of the five RBOCs together with Compaq, Intel, Microsoft and other hardware and software vendors. That proposal would allow RBOCs to carry data traffic beyond local calling areas, and drop the requirement that they wholesale data lines to competitors in exchange for a much broader DSL rollout.

"It's sometimes a little seductive to perpetuate a monopoly in exchange for these high-bandwidth networks," Kennard said. "But we've got to keep our eye on the prize [of full competition]. It would be terrible if at the end of the day consumers had only one high-bandwidth network available to them from a monopoly provider."

He pointed out that many of RBOCs' current DSL offerings have occurred in areas where cable companies have introduced high-speed cable modem service.

Still, Kennard, who has a reputation for graciousness that often eluded former FCC Chairman Reed Hundt, added: "I'm encouraged that the computer industry is beginning to participate more in these processes here at the FCC." And he pointed out that the FCC also has a proposal to allow RBOCs to escape many data regulations under a separate subsidiary, though without the ability to break out of local calling areas. The FCC is expected to vote on that proposal - which RBOCs generally have shrugged at or panned - on Jan. 28.

Kennard's press conference was the first in the FCC's swanky new headquarters overlooking the Potomac River waterfront, which over the holidays replaced the agency's drab government-issue offices in the heart of Washington's lobbying and trade association district. Reveling in figures showing that holiday gift shopping over the Internet has leaped and long-distance prices have dropped, Kennard said he was satisfied that the Telecommunications Act of 1996 was working, and laid out some additional goals:

Consumer protection. Last month the FCC passed tough new regulations against slamming - the practice of changing a customer's long-distance carrier without explicit authorization. This year the FCC will pass a regulation forcing carriers to make their bills less confusing, Kennard said.

Universal service. Over the past two years the FCC has established and then defended against critics a scheme to subsidize Internet access at schools. This year, the FCC will complete rules designed to make sure all customers in rural areas have access to equivalent services as urban customers, Kennard said.

Wireless. Kennard said that while wireless telephony prices have dropped about in half over the past few years, a key goal for 1999 is to dramatically ease the ability of service providers to offer wireless local-loop access for both voice and data.