By KENNETH CROSSMAN | The Washington Post Washington (AP) As the government and telecommunications companies scramble to build a fiber optic network, the federal government has decided to block new entrants to the market, a move that critics say could stifle innovation.
Federal regulators are expected to approve an application by Frontier Communications, which already operates fiber optic lines in some parts of the country, to begin selling a service that lets consumers watch and listen to the digital signals they transmit.
The move could be a setback for competitors such as CenturyLink, which has sought to expand its fiber optic networks.
Frontier has said it would offer customers free access to streaming videos and music, but not online video.
The federal government said Frontier’s application to expand to the United States was not approved and would be considered only if it is “clearly and demonstrably” required to do so.
Frontier’s chief executive, Michael Hayden, said Monday the company would begin selling its fiber service in mid-January.
Frontier also plans to launch its service in Europe in the coming months.
The Federal Communications Commission has been working on new rules for broadband internet since January, but officials have not issued any public comments on the proposal.
They say they need time to study it and make a final decision.
Hayden said the FCC will likely issue a final order in the next several months.
In December, the FCC approved a $400 million incentive package for Frontier to build and deploy a fiber network in some rural areas.
The company will also receive an additional $150 million for its work in expanding its existing network.
The agency has not said what additional incentives the company will receive.
The Frontier application will include a list of the types of devices that can be used to stream or record online content.
Frontier will also offer its service for $40 per month, and it will be free for existing customers.
“We are excited about our ability to provide broadband internet access to rural America,” Hayden said in a statement Monday.
“This is a significant investment for Frontier, which is already a major broadband provider in rural America.
Frontier intends to make its broadband offering available to all Americans, regardless of geographic location.”
A company spokesman said the company was “disappointed” in the decision.
“It’s very disappointing for consumers, and for Frontier,” the spokesman said.
Frontier is the latest company to face criticism over the rules.
In May, AT&T Inc. announced it would allow subscribers in rural areas to use unlimited data plans with no monthly fees.
That came after the FCC rejected the company’s request for a temporary pause in new service rules because it would slow the deployment of new networks.
“These are decisions that will impact millions of Americans, and we are working hard to ensure that we’re complying with all the requirements and will provide our customers with the speed and quality that they expect,” AT&t said in May.
Frontier was founded in 1996 and has been a pioneer in providing high-speed broadband service.
In 2010, it bought a joint venture from the company of AT&G Inc., which had operated a fiber cable system in rural and low-income areas.
It is the largest provider of fiber optic internet to the U.S. At the time, AT &G said it was the first to offer fiber-optic internet in the rural communities of Wyoming, Utah, Arizona and Louisiana.
Frontier had said it had plans to build up to 10,000 fiber-to-the-home lines in the United Kingdom by 2020.
AT&T and Frontier said they were not able to agree on prices for their fiber optic broadband networks and agreed to a temporary suspension of the rules after the companies had an agreement on a price.
Frontier, meanwhile, has faced criticism from Democrats who say the rules would stifle competition in the broadband industry and would hurt small businesses.
The new rules have been under consideration by the Federal Communications Board since February.
A number of Democratic lawmakers, including House Minority Leader Nancy Pelosi, have called for the FCC to revisit its rules.
Federal officials said Frontier could face fines if it fails to abide by the restrictions.
“Federal agencies have the ability to enforce the existing rules in certain circumstances, but they do not have the authority to prevent Frontier from engaging in a new, innovative, or technologically advanced way to deliver broadband Internet access,” said FCC Commissioner Jessica Rosenworcel.
“Given Frontier’s proven track record, it is the correct policy decision for the Federal Government to continue to allow Frontier to expand the scope of its network to meet the unique needs of rural communities.”
Frontier’s announcement comes as the Federal Reserve Bank of New York is studying whether to impose capital requirements on banks, which are facing unprecedented capital outflows as the economic downturn drags on.
Some financial institutions are asking if it will mean higher interest rates for them.
But the Federal Deposit Insurance Corporation said last week that banks do not need to provide financial assistance to customers in times of economic uncertainty.
“The banking industry does not anticipate