The ruling puts Bell companies on equal footing with cable companies, which also are under no obligation to share infrastructure with ISPs.

The changes will enable wire line broadband Internet access providers to respond quickly to consumer demand with efficient, innovative services and spur more vigorous head-to-head competition with broadband services provided over other platforms, said the FCC.

There would be a one-year transition period, which is expected to begin in October, in which Bells must still provide network access to ISPs. The phone companies could then cut off or negotiate new terms with ISPs, such as America Online Inc and EarthLink Inc, to lease their networks.

Verizon Communications Inc, which is attempting to buy former WorldCom outfit MCI Inc, and SBC Communications Inc, not surprisingly welcomed the FCC’s decision.

The pair, which are the largest local phone carriers in the US, had previously complained that having stricter regulations than cable operators put them at a competitive disadvantage. They also had hinted that line-sharing regulations discouraged large-scale investments in developing new broadband products and services.

The benefits of this ruling will ripple across our communities by encouraging greater investment in and a wider rollout of broadband networks, said James Smith, SBC senior VP, in a statement.

A Verizon spokesperson, who requested that his name not be published, balked at the suggestion that Verizon would limit or block independent ISP access to its networks in a year’s time. We want traffic on our fiber and DSL, he said. It’s not in our interest to lose customers.

On whether Verizon would up the price for ISP access to its networks, the spokesman said such a move would weaken the company’s competitiveness. It’s a marketplace and we are bound by the marketplace, he said. He also noted that Verizon’s DSL-access prices had been steadily going down in recent years.

Still, Verizon is in the process of rolling out naked DSL nationwide. The only other Bell in the US to offer standalone DSL is Qwest Communication International Inc.

Heavyweight ISP EarthLink was quick to issue a statement on Friday, even though it appeared somewhat cryptic.

Today’s FCC ruling effectively preserves DSL access for the next year. Beyond that, we are confident that we will extend our existing commercial agreements with the Bells so that we can continue to deliver DSL services, the company said.

An America Online spokesperson did not return calls for comment.

Forrester Research VP Lisa Pierce said the deregulation of DSL forces independent ISPs to prove superior value over Bell company DSL offerings, such as new services and features.

It’s not going to be that difficult to provide extra value, she said. But it does mean innovate or die.

If an independent ISPs claim to fame was inexpensive service, they’re history, Pierce said.

In the long term, DSL deregulation may make the business case for alternative broadband technologies, such as broadband-over-power line and WiMax, more attractive, provided those upcoming technologies are able to iron out existing technical issues, she said.

It’s going to be … maybe three years before any of these technologies are well-baked enough and at least available in select markets to be able to determine how competitive they can be, Pierce said.

The Information Technology Association of America was among critics of deregulating DSL. The largest IT trade association in the US said a dearth of legitimate competition in the wholesale broadband telecom market meant the ruling would force ISPs out of business and limit consumer choice.

By taking this step, the Commission would condemn consumers to higher prices, fewer choices, lower service quality and reduced innovation, said ITAA president Harris Miller, in a statement.

For competitive local exchange carriers such as Covad Communications Group Inc, which leases DSL lines from Verizon, SBC and Qwest for 90% of its network coverage, are not directly affected by the new rules.

CLECS are classified differently from independent ISPs because they have equipment set up at the Bell’s central offices and are responsible for the running and maintenance of the lines it leases. Indeed, Covad may benefit from deregulation.

In light of this decision, it is clear that Covad offers the only national alternative broadband network to ISPs and VoIP providers, said James Kirkland, Covad VP and general counsel, in a statement. Covad is uniquely positioned to offer the ISPs an alternative for connections to their customers.

Under the FCC’s new rules, DSL providers would still be required to open their networks to law enforcement for wiretapping.