Powell, along with giant telecoms such as Verizon, wanted the rule wiped clean from the books and fiercely objected to giving states purview.

Martin said individual states are in a better position to decide the fate of a particular market.

"I support this item because it achieves a principled, balanced approach. It ensures that we have competition and deregulation," Martin said.

The commission also took a vote on regulations governing high-speed Internet service, with the three Republicans agreeing to ease regulations forcing providers to share the lines with competitors. [Variety]

More on the details of the ruling:

The nation's phone giants moaned that the FCC failed to drop outdated rules that let competitors use Bell networks at discounted prices. Consumer groups praised the decision because it preserves the ability of long-distance carriers like AT&T Corp. and WorldCom Inc. to offer local service.

But consumer groups also complained that the phone companies won dangerous power over the future of Internet access, closing out smaller providers and guaranteeing higher prices for residential users.

....The FCC was faced with an extraordinarily complex task — to reconsider, by a court-ordered deadline, its enforcement of the 1996 Telecommunications Act. Two earlier sets of rules had been rejected by federal judges.

One major ruling Thursday was that state regulators will decide where, and at what price, Bells must make parts of their networks available to rivals in order to ensure competition.

....The FCC did free the Bells from having to make new high-speed fiber-optic lines available to competitors at regulated prices. The Bells had long sought this bit of deregulation, saying it was vital for them to compete better with cable modems and get broadband to more homes.

"Their bluff was called," said Joan Marsh, AT&T's director of federal government affairs. "It's time for them to put their money where their mouth has been for a number of years."

Phone company executives countered that because the FCC didn't do enough to keep their basic landline phone business from shrinking, they won't have the money to invest in new fiber networks.

Still, some analysts said the Bells were given an enormous opportunity to confirm their lock on the "last mile" of wiring to individual homes. Indeed, Covad Communications Co., which leases Bell lines to provide DSL high-speed access, said it might abandon selling to consumers and concentrate only on businesses. [AP]