FCC Sides With Cable Phone Firms
In a move that's expected to bring new discount phone services to millions of rural Americans, the Federal Communications Commission ruled Thursday that local phone companies cannot block cable providers' rival Internet-based phone offerings.
"The commission must promote competition," FCC Chairman Kevin Martin said.
In an FCC petition last year, Time Warner Cable complained that rural carriers in South Carolina and Nebraska refused to set up connections so users of the company's Voice over Internet Protocol (VoIP) service and rural phone customers can exchange calls. The carriers also would not provide local phone numbers and 911 services.
Time Warner typically leases these services from MCI and Sprint, which, in turn, lease them from the rural phone companies.
The rural carriers claimed a federal law promoting competition doesn't require them to provide the services because MCI and Sprint would not serve residents directly. They also noted VoIP has not been labeled a telecommunications service. State regulators in South Carolina and Nebraska sided with the rural carriers. Similar battles are playing out in other states.
But FCC staff said wholesale providers are entitled to the same network-leasing privileges as retail companies and that VoIP's classification is irrelevant.
Cable companies have lured millions of VoIP customers from local phone giants in major cities but largely have been shut out of less-populated markets, many of which have no land-line phone alternative. "This will enable Time Warner Cable to deploy its digital phone service to areas that have been denied the benefits of competition," the company said in a statement.
VoIP requires a broadband line and sends calls over the Internet.
Analyst Jessica Zufolo of Medley Global Advisors says the ruling should let cable companies "fully penetrate these rural markets."
But Dan Mitchell of the National Telecommunications Cooperative Association, which represents rural companies, says the FCC should have first resolved how much VoIP providers must pay local phone companies to connect calls. They now often pay very little.
"They're imposing costs on our networks and not paying for it," Mitchell said. "From our perspective, that's unfair competition."
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