FCC Suggestion Spurs (More) Conflict

The Federal Communications Commission (FCC)'s track record in telecom regulation is predictable enough: When it speaks, the industry listens. Then argues. A lot.

This week FCC Chairman Michael Powell urged telecom carriers to reach an agreement within 30 days on the prices incumbents charge competitors to use their networks. Rather than bringing anyone to the bargaining table, the suggestion only magnified the rift between the incumbent local exchange carriers (ILECs) and their competitors.

Speaking at the National Association of Regulatory Utility Commissioners Wednesday, Powell said that if an agreement is not reached within the given time, he would advise FCC commissioners to impose a moratorium and delay any changes to existing telephone service for 18 months.

Powell’s remarks came after the U.S. Court of Appeals struck down FCC rules requiring incumbent carriers to make their networks available to competitive local exchange carriers (CLECs) at low rates (see Courts Overrule FCC Again ). ILECs have argued that being forced to share their networks with competitors put them at a competitive disadvantage and eliminated incentives to build new networks.

SBC Communications Inc. (NYSE: SBC) said it would freeze existing fees for 90 days during the negotiation period. Verizon Communications Inc. (NYSE: VZ) said it would "negotiate in good faith" with competitors in the coming weeks (see Skeptics Question RBOC Victory).

The competitors aren't buying a word of it. They’re worried a potential price hike in line-sharing charges will cost them dearly. An MCI (Nasdaq: WCOEQ, MCWEQ) spokesperson says past attempts to negotiate with the former Bell companies have been unsuccessful. The recent ruling by the appeals court "shackled the FCC and ignored the mandate" of the Telecommunications Act of 1996 (see MCI Reacts to Triennial Review Ruling).

In a statement, AT&T Corp. (NYSE: T) general counsel Jim Cicconi said Powell’s recommendation "will mean an end to a competitive local marketplace." Cicconi said AT&T has been in negotiations with the ILECs for eight years and expressed doubt that the new discussions would produce competitive rates for consumers.

Telecom trade association CompTel/Ascent Alliance weighed in on the side of its biggest members. CEO H. Russell Frisby Jr. said in a statement yesterday that Powell "has eliminated any incentive of the Bell companies to negotiate in good faith."

Thomas M. Koutsky, the VP of law and public policy for competitive carrier Z-Tel Technologies Inc. (Nasdaq: ZTEL), calls Powell’s suggestions an "absurd and illegal power grab."

AT&T spokeswoman Claudia Jones says the only plausible outcome of the recent appeals court ruling is increased prices for consumers and reduced market competition (see AT&T Responds to FCC Chairman). Jones adds the idea of implementing a national uniform rate is unrealistic and that rates must be determined on a market-by-market basis.

What would be a reasonable rate? AT&T didn’t comment on that, and MCI said the current fair price for line-sharing is set by the states based on the line’s cost.

Contrary to Powell’s pontificating, the solution to what carriers should be charged to compete inevitably lies within the courts. Jones says ILECs will not even negotiate usage rates, knowing that the Supreme Court might review the appeals court decision.

What happens next?

Both sides of the issue will likely bend the ear of Solicitor General Ted Olson, the Bush administration’s top Supreme Court lawyer, according to Brad Ramsey, general counsel for the National Association of Regulatory Utility Commissioners (NARUC) (see Naruc Weighs In on FCC Court Decision). The Court is much more likely to review the case if Olson is involved, though it may do so regardless. "Whose side is the [solicitor general] on? This will ultimately affect both sides’ actions going forward," Ramsey says.

— Joelle Pauley-Fine, special to Light Reading

materialgirl 12/5/2012 | 2:16:08 AM
re: FCC Suggestion Spurs (More) Conflict Another FCC cop-out. The incumbents have been arguing over line costs since deregulation was just a gleam in a regulator's eye. In such a fixed cost system, variable costs are a "negotiated number." The fact is, no agreement has been made, even with the involvement of courts and regulators, since the Act was enacted. Expecting these carriers to play nice and figure out prices on their own in the next few months is a joke, and they know it.
huntseat 12/5/2012 | 2:15:59 AM
re: FCC Suggestion Spurs (More) Conflict It is a fortunate consequence of our brilliant constitution that the federal courts are checking the regulatory power of Congress and the FCC. While the FCC and state regulators debate bureacratic details of line sharing the emerging technology will make their debate and resulting rules obsolete. We can only hope that the courts will prevail.

The UNE-P (line sharing requirement) should simply be eradicated. It amounts to artificial competition. Continuation of the UNE-P will insure that ten years from now we Americans will be paying low rates for our copper wire phone/DSL lines while the Japanese and Koreans will be enjoying fiber optic mega-bandwidth. The baby Bells (RBOCs) already are facing serious competition from cable companies (who dont have to share capital equipment) and wireless service providers, so they dont need the government to interfere with the natural process in the name of competition.

Persistence of the UNE-P will garantee that neither ILECs nor their free-riding competition (CLECs) will invest in new infrastructure. Eradication of the ill conceived UNE-P would provide a vigorous stimulus to the US economy and create the new jobs being called for.
cpad2000 12/5/2012 | 2:15:08 AM
re: FCC Suggestion Spurs (More) Conflict Interesting read: the quotes used by IXCs and CLECs is just honest commentary but Powell is pontificating. Why the media that follows this industry insists on standing up for CLECs at all costs, all the time is beyond me. They are irrelevant in their current structure, many were blatently disregarding the risk that the court decision could bring (or worse), at least in teh meetings I had with 4 of the public ones. When it comes to the real roadmap the industry is on, they will exert little to no influence. There interests are a sideshow, nothing more, nothing less. What would be nice to see is reporting that analyzed what happened without seemingly taking a side. Instead of standing out, it reads like everything else on the topic.
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