The Bell companies have had one long-awaited dose of freedom this summer, and may be about to find the cure for all their regulatory ailments.

The FCC decision to declassify DSL as a telecom service — and thus largely remove it from regulation and open access requirements — is a critical step in the eyes of the Bells, particularly since the U.S. Supreme Court ruled that their arch-rivals, the cable multiple system operators, can maintain their closed broadband networks.

But the FCC decision addressing one issue is likely to be followed by Congress tackling many more facets of telecom reform. The first major salvo in that process was fired by Sen. John Ensign (R-Nev.), who introduced his Broadband Investment and Consumer Choice Act on Aug. 2, producing a measure that delighted the Bell companies, if not consumer groups and municipalities (see story on page 12).

“This legislation will transition us from a world of stifling government managed competition to a consumer controlled marketplace,” said Ensign in announcing the bill. “This bill impacts the services that are important to American consumers: voice services, video services, wireless services and broadband service. We put in place federal rules that encourage market forces to work and that allow consumers to choose the best products and services at the best prices. Changes in technology necessitate that we update these rules if America is going to be competitive in the face of global competition.”

Ensign's bill would move the U.S. away from government regulation of all but basic services and more toward market-driven rules, eliminating local franchises for video services in the process. It would prevent regulation of rates, terms or quality of any voluntary resale of broadband service, which is defined as anything above 64 kb/s. And it prevents states from imposing requirements for interconnection or intercarrier compensation.

Ensign's bill does not address the Universal Service Fund, which Sen. Ted Stevens (R-Alaska) has said he will address in a later measure.

In general, the winds of change are blowing in the direction of the Bells and their drive for deregulation, but that doesn't mean it's all smooth sailing from here.

A coalition is building, with strong support from the technology community, to protect the Internet from the potential damage of a telco/cable duopoly on Internet access. Some foreshadowing of these concerns showed up in the FCC's ruling on DSL, when Democrats Michael Copps and Jonathan Adelstein were able to get language built into the ruling to protect “Internet neutrality” and to forbid carriers from blocking access to content or from blocking a competitive voice-over-IP service.

“For the first time ever, the commission has adopted a policy statement with principles that will guide our effort to preserve and promote the openness that makes the Internet so great,” said Copps after the ruling. “We need a watchful eye to ensure that network providers do not become Internet gatekeepers, with the ability to dictate who can use the Internet and for what purpose. While I would have preferred a rule that we could use to bring enforcement action, this is a critical step.”

The Coalition of Broadband Users and Innovators, which includes consumer groups and Internet companies like Amazon.com, eBay, Microsoft and Yahoo, is calling on Congress to take the next step and adopt a policy on Internet neutrality, to prevent either cable or telephone companies from restricting access to content through their ISPs. Rep. Rick Boucher (D-Va.) has told the Washington press that he believes Congress should codify the FCC's policy statement and add enforcement powers.

There is also no guarantee that any reform measure will make it through the current Congress, given the complexity of the issues involved.