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Courts Overrule FCC Again

Light Reading
News Analysis
Light Reading
3/2/2004
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A U.S. appeals court today overturned some key FCC positions on UNE-P line-sharing, resulting in a rally for the shares of incumbent service providers and applause from the minority seats in the FCC.

In last August's Triennial Review, the FCC delegated much of the regulation of local telecom line-sharing to individual states. At the same time, the FCC rules said carriers had no obligation to share access to any new construction of fiber optic broadband access. The decision deeply divided the FCC, which split 3 to 2 on the decision on UNE-P and states' rights (see FCC Rumbles on the Rules , Fiber Surprise in FCC Rules? ).

Today, the U.S. Court of Appeals, D.C. Circuit, said the FCC had no authority to hand control of UNE-P line-sharing over to the states. It also upheld provisions exempting line-sharing requirements for newly built fiber-access line sharing.

The decision shows that the federal courts are inclined to strike down the FCC's efforts to regulate line-sharing -- and appear to significantly undermine the authority of the Commission. The court granted a 60-day stay of the order to give the FCC a chance to appeal, but the language was strong and indicated that the courts are anxious to put the issue to rest:

"This deadline is appropriate in light of the Commission's failure, after eight years, to develop lawful unbundling rules, and its apparent unwillingness to adhere to prior judicial rulings."

D'oh!

The decision also adds an additional twist to an already complicated political scenario at the FCC: Chairman Michael Powell, who found himself on the losing end of the battle to eliminate line-sharing, in the Triennial Review, now finds himself being supported by the courts.

The FCC decision last August put Chairman Powell in the awkward position of being on the minority side of the UNE-P battle. He was abandoned by fellow Republican Kevin Martin, who switched sides to vote with democratic commissioners Jonathan Adelstein and Michael Copps to oppose the elimination of UNE-P.

Today, the majority of commissioners opposed the court decision, which essentially undermines their authority.

"We are disappointed in the Court’s decision to eliminate the Commission’s rules requiring incumbent carriers to open their legacy voice networks to competition," said a statement released by Commissioners Copps, Adelstein, and Martin. "We believe that the rules preserve competition in a manner that is lawful, and recognize the important role that states have historically played."

Meanwhile, the Powell side dug in. "Today’s court ruling upheld the Commission’s decision to spur the development and deployment of vital broadband services to all Americans," said a statement released by Powell. "As a result, our citizens will enjoy the increased capabilities, innovation, and lower prices of advanced wireline broadband services for decades to come."

In short, the FCC now finds itself in a position of having a Chairman who supports a court ruling that struck down the commission's own past efforts.

Where's it all headed? Given that the courts and the FCC are still battling over essential rules of the 1996 Telecom Act, there will be further appeals and legal wrangling. But two thing's are for sure: The FCC's authority looks to have been significantly weakened by the ruling and the incumbent providers are feeling more confident. — R. Scott Raynovich, US Editor, Light Reading

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romulusx
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romulusx,
User Rank: Light Beer
12/5/2012 | 2:19:57 AM
re: Courts Overrule FCC Again
spend more time fighting each other than allowing free markets to make decisions. Other countries are leading the way in Broadband deployment while the politicians here can't get out of the way. To think a Republican help delay this just goes to show you the sad state of affairs in our political system. The government is becomming a hinderance to the liberty of innovation. Think of where we would be if they would just get out of the way...
lastmile
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lastmile,
User Rank: Light Beer
12/5/2012 | 2:19:56 AM
re: Courts Overrule FCC Again
It is so ironical that 5 members in the FCC decide the fate of the Telecom industry.
If they had any credibility the Courts would never have featured in their decision making ability.
Complete deregulation will spur innovation. Let the Bells control their Copper. Copper is no longer a threat to anyone.
If for some reason they decide to upgrade they should not be forced to share that new investment. In the name of 'consumer interests' the FCC has been messing things for a very long time.
Just deregulate and let the market decide.
rtfm
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rtfm,
User Rank: Light Beer
12/5/2012 | 2:19:54 AM
re: Courts Overrule FCC Again
Well, I agree that over-regulation is bad, but "free markets" don't necessarily mean no regulation. The end-state for many systems is a monopoly, and monopolies could, sans regulation, exert monopoly power, and this violates a basic tenet of "the market."

IMHO, there are fundamental issues regarding monopolies, or former monopolies. There was a good article somewhere that showed how cable companies have increased *cable* rates much more than inflation. Some of it is for "customer service" (oxymoron for them!), some for increased content (mainly sports), and a large chunk for for "upgrades" that essentially allow them to give broadband (disguised as PPV and other TV solutions).

Why should TV viewers pay for the broadband costs? Similarly, my phone bill (local) is what paid for the copper infrastructure. Now, if the RBOCs want to give me DSL, I shouldn't pay twice (if they are forced to charge me for the infrastructure)? But, that then creates the monopoly. This is a tough (and perhaps unanswered) one.

rtfm
wise
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wise,
User Rank: Light Beer
12/5/2012 | 2:19:52 AM
re: Courts Overrule FCC Again
Certainly, the FCC has not done a decent job of becoming the experts that they need to be in order to set responsible policy.

The state utility commissions are somewhat better, but need a Federal mandate to provide guidelines. State commissions at least understand more about the cross-subsidization in their own geography and implications of trade-offs. They may also better understand the way to stimulate incumbents to provide services fairly to a broader cross-section of the population.

The countries where broadband implementation is more pervasive and successful are countires that have a national program with national targets and a strong protected and regulated monopoly - at least at the residential level.

1236
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1236,
User Rank: Light Beer
12/5/2012 | 2:19:51 AM
re: Courts Overrule FCC Again
My reading of the TRO (all 500+ pages)prevented the ILECs from having to unbundle broadband service in greenfield applications. On copper overlays, the ILECs could not retire loops without consent of the state commissions, and overlay broadband only had to provide the bandwidth for voice transmission. Other than the necessary review for retirement of copper, I don't find this to be a bad deal.
An ILEC will go after greenfield apps anyway becuase of the lower cost and higher possible returns. Overlays and retorfts will be the last resort sicne most of these will occur where there is already DSL. FTTU and other broadband would not have been damaged by the TRO.
The main beef with the TRO was local switching. The local switching mandates, especially the batch hot cut process were the driving force behind the USTAs argument. The CELCs wanted the ILECs to implements a batch process, and each state was to decide on it along with the cost.
I suggest the free marketeers out there, read the TRO and the circuit courts decision.
fgoldstein
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fgoldstein,
User Rank: Light Sabre
12/5/2012 | 2:19:50 AM
re: Courts Overrule FCC Again
Once again, the DC Circuit misread the record and the law. IANAL, but after reading the entire 62-page decision, and having read the entire TRO, I can't imagine how the two comport on facts.

The Court was probably correct in nixing Martin's state-rule systems for UNE-P, wherein every state got to make a final determination. The Court said that was unlawful delegation. The probable work-around is for the FCC to take back the determination, but ask the states to collect evidence.

The Court stated that there was no evidence in the record that there is any economy of scale in switching! While I doubt the truth of that, the TRO does address it, with some specific numbers (relating to concomitant backhaul costs).

The Court stated that the proper impairment analysis for interoffice transmission should not be route-by-route, but market-by-market. Thus if there is plenty of bandwidth between Trenton and Princeton, then by gum there is no need for unbundled bandwidth to Cranbury or Wrightstown, because they're in the same market! And if that's not enough, then there's always Special Access! This is absurd logic. Fiber in the ground can not be used wherever the demand is; it is only useful where it is. Judges from the planet Remulac would get that better.

The FCC's anticompetitive Broadband ruling was justified on grounds that Section 706, a vague motherhood-and-apple-pie statement about advanced networks (and competition, which the Court ignored) trumped Section 251's specific unbundling obligations, when the ILECs proclaimed that they didn't want to install advanced networks if they had to live up to Section 251. This is again preposterous reasoning. But there are various other places where the Senior (semi-retired) Judge writing the ruling essentially holds up all ILECs to be the Mother Theresas of the information age, and competitors wanting TELRIC rates to be basically vandals ("an ILEC can't be used as a pin~ata"). This is the 8th Circuit all over again, due for appeal to the Supremes on many grounds.
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