The Federal Communications Commission said its interconnection rules, currently in limbo, are still relevant despite a technology AT&T will use to enter local phone markets more quickly.
"[AT&T's technology] does eliminate the need to buy unbundled loops," said an FCC spokesman. Unbundled loops are essential parts connecting the home phone to the local phone company's central network.
The technology, announced Tuesday, consists of a radio transceiver box - a personal base station - that will take voice and data transmissions from a home phone, convert them to digital information and send that data across AT&T's burgeoning Personal Communications System (PCS) wireless network, bypassing most of the local telephone networks.
AT&T has been developing this technology in-house for three years. It is now being tested in Chicago. The technology, fixed wireless, uses a combination of wireless technologies including spread spectrum to transmit data at 128 Kbps across a small slice of the PCS spectrum. To do this, AT&T acquired additional PCS capacity in the FCC auctions.
Still, the technology will not give AT&T an entire network of its own. "It's a minor bypass of the interconnection agreements but it doesn't ultimately allow them to avoid tying into the local exchange carrier's network. There's a handoff from local subscriber to the local exchange carrier no matter what," said the FCC spokesman.
Just how much that handoff will cost is still an issue to be hashed out by the FCC or, more likely, state regulators. The FCC attempted to set prices in its rules for opening local telephone networks issued last August. But last October, a federal circuit court in St. Louis, Missouri, ruled that the FCC overstepped its bounds by setting prices for resale or purchase of parts of the local phone networks. The Supreme Court upheld the stay and is currently hearing arguments on the merits of the rules.
Entry into the local phone market is a sticky issue for carriers such as AT&T, MCI, and others because the local networks have been built and are owned by the incumbent local carriers such as the Baby Bells and GTE. The FCC and state regulators have fashioned two alternatives for new local carriers to enter these markets quickly - buy complete access from the incumbent to resell, or buy access to part of the network to connect to its own facilities.
A third alternative - building a new network from scratch - is not seen as a realistic option, particularly when companies would have to put their copper or fiber into the ground. But by tying home phones into a wireless network, AT&T has provided itself with a cheaper way to use its own network.
Building a wireline network costs at least US$1,500 per subscriber, said Mark Lowenstein, vice president of wireless research for The Yankee Group, a Boston-based research firm. By contrast, building a fixed wireless network costs under $1,000 per subscriber, he said.
Lowenstein said the development will definitely make local phone competition interesting in the near term. AT&T is the biggest provider of wireless services in the United States with 7 million subscribers, and it has more capacity along its networks than other companies, he said.
"It saves them a significant amount of money ... it puts them on a faster track to enter the market," Lowenstein said.
Following in AT&T's steps will be difficult, too. The telecommunications giant has filed patents for its techniques that increase the capacity of its spectrum and optimize the data for transport over high-capacity fiber.
Nonetheless, the Bells are undaunted. They, too, are keen to this idea of substituting wireless networks for the copper and fiber, mostly because it saves them money. For example, a spokesman for Pacific Telesis said the carrier is looking to use wireless to enter local phone markets in Southern California that are currently served by GTE.
