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Press Release

Contact:
Chriss Swaney
412-268-5776

For immediate release:
January 13, 2003

Carnegie Mellon Professor Predicts Consumers May See Fewer Price Breaks under FCC Ruling

PITTSBURGH—Carnegie Mellon University's Marvin Sirbu says a proposed plan by the Federal Communications Commission (FCC) to stop making local phone companies rent their networks to their competitors at cheap rates could reverse the increasing competition for customers that had begun to push prices down.

Sirbu, a professor in Engineering and Public Policy, said the proposed plan could derail the growing competition for local phone service without offering a workable alternative.

"Essentially the plan would undo the FCC's seven-year-old rules intended to help competitive local exchange carriers (CLECs) and long-distance companies compete with the Bells, instead forcing them to pay higher prices to rent network access or buy more of their own equipment. And it would continue to allow the Bells to compete on the long-distance companies' home ground, where they have made significant inroads," Sirbu said.

At issue are the FCC's rules that require the Bells to lease competitors access to the full sweep of their networks and equipment, at rates they say are below cost. The Bells also argue that low lease prices discourage them from upgrading the local network, such as broadband fiber to the home. Their rivals argue leasing allows them to enter the local market without having to duplicate the Bells' extensive local network, and that the Bells' cumbersome ordering process makes it impossible for the competitors to combine Bell loops with the competitor's own switching equipment. Without the ability to affordably lease all parts of the Bells' network, the only competition would come from cable companies and cell phone carriers - and the bulk of the latter is owned by Bells, according to Sirbu.

The plan, now in draft form, could be voted on next month by the FCC commissioners. Sirbu and other industry experts say the new rules could be the most drastic changes in the nation's telecommunications laws since Congress passed the Telecommunications Act of 1996.

"Whatever rules are issued, one or more parties will undoubtedly take the FCC to court; it may take two or more years before the final shape of the rules will be determined," Sirbu said.

Sirbu can be contacted at 412-268-3436 and email: sirbu@cmu.edu.

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