By Josh Long

Covad Communications Group Inc. was dealt a blow last year when the FCC voted to phase out rules that require the biggest local phone companies to share a part of their networks with high-speed Internet providers.

Now, the commission may choose to preserve those regulations. Although the FCC voted 3 to 2 in July to adopt interim rules governing wholesale network access to the biggest local phone networks, FCC Chairman Michael Powell is seeking to reach a compromise with the two Democrats, Jonathan Adelstein and Michael Copps.

As part of the compromise, the commission may keep in place regulations that allow broadband providers, such as Covad, to share the local phone line with the likes of BellSouth Corp. and SBC Communications Inc. Last year, the commission released an order that phased out the requirements over three years.

«… I would ask you to reconsider your vote to eliminate line-sharing for competitors,» Powell wrote in a memo to Adelstein and Copps. «I feel strongly that line-sharing was a pro-competitive measure that promoted facilities-based alternatives for broadband competition.»

The FCC is planning to freeze for six months the wholesale phone rates telecommunications companies such as Talk America Holdings Inc. and MCI Inc. pay to BellSouth, SBC and other incumbents for access to their local networks after a federal appeals court rejected contentious rules the commission released last year. The rules affect local-phone competition in the residential and small business market.

The federal agency could release the interim rules as soon as this month before issuing final regulations.

Under a proposal supported by three FCC commissioners, the four regional Bells could charge rivals prices that are up to 15 percent higher than current rates for access to certain parts of the local phone network. The rate increase would affect the rates competitors pay the Bells to support their existing customers and would only apply if the commission did not release final rules by the time the freeze on rates ends, according to people familiar with the proposal. Also, the price increases would affect only parts of the local phone network -- specifically those unbundling rules overturned by the U. S. Court of Appeals for the District of Columbia Circuit.

If the FCC does not act within six months following the release of the interim rules or declares a part of the local network is not subject to unbundling requirements, competitors would either have to pay the Bells rates negotiated through a commercial agreement or fees based on resale rules to acquire new customers.

The commission is expected to release interim rules along with a notice of proposed rulemaking. In the notice, the FCC could possibly reach some tentative conclusions about final rules and ask the public to comment on what parts of the biggest local phone networks the Bells should be required to make available to competitors under federal regulations. For years, the industry has bickered over the right of competitors to lease the Bells’ local telephone switches at government-mandated rates.

FCC unbundling requirements perished earlier this summer after the federal appeals court in the District of Columbia rejected regulations governing wholesale network access to the biggest local phone networks. AT&T Corp., the biggest long-distance phone company, has retreated from the residential phone market, citing unfavorable changes in the government regulations. Other phone companies also are pulling back from the local residential phone market.