FCC Focuses on DSL Classification
“In order for companies in the broadband industry to grow and flourish, there needs to be regulatory certainty,” she said. “Without it, competition will flounder. But the steps necessary to bring clarity and stability are harder than one might think.”
In her speech, Abernathy outlined the three main regulatory areas. While she did not make specific reference to what she thought the outcome of these efforts would be, she did emphasize what she believes is the most important issue facing the FCC right now: the classification of broadband services. “You need to know which bucket something goes into before you can start applying rules to it. And that’s what we are trying to do.”
Classifying broadband is key to determining whether or not it is to be regulated as are voice services. Earlier this year, the Commission claimed authority over cable-modem service and determined it should be classified as an information service and not a telecom service (see FCC Claims Authority on Cable Modem). In May, a federal appeals court ruled in favor of incumbent carriers, easing unbundling requirements and requiring the FCC to come up with clearer policy (see RBOCs Ring Up Court Victory). These recent events show the regulatory momentum going against competitive broadband carriers that are looking for access to incumbent networks.
While the classification of cable modems is set, the classification of DSL is still under consideration. It is currently classified under the 1996 Telecommunications Act as a Title 2 service or a telecommunications service, which means that it is subject to the stringent regulations the FCC has imposed on other wireline services like telephony. But the incumbent carriers, or RBOCs, have lobbied hard to make sure that DSL, like cable modem, is also classified as an information service. This way, they would not be regulated in the same way as telephony. In a tentative decision by the FCC, the Commission has stated that it also believes it should be classified as an information service. An official decision is expected by the end of this year.
Abernathy told the crowd at the meeting that the Commission will base its decision on the DSL classification on the same criteria it used to determine that cable modems should be considered a Title 1 or an information service.
Several experts who spoke during the panel discussion applauded Abernathy's efforts for trying to bring some certainty to the broadband market.
“Her comments give me hope,” said Allen S. Hammond, professor of Law at the Santa Clara University School of Law. “I’m happy to hear that the Commission is working toward creating more certainty in the regulatory environment. Without regulatory certainty, there are no deployments. And without deployments, you don’t get universal access to the technology. And without that, the digital divide still exists.”
But others in the audience were not so thrilled by what they perceive as Abernathy’s bent toward deregulation. Jason Oxman, vice president and assistant general counsel for Covad Communications Inc. (OTC: COVD), the only nationwide DSL competitor still operating, said the FCC’s reclassification of these technologies is unnecessary. He said the Commission could simply change outdated rules while leaving the classification of DSL technology alone.
“It’s nonsensical and unnecessary to reclassify DSL,” he said. “The Commission could get the same effect by changing rules. I don’t think they have thought through all the implications.”
Oxman accused the FCC of bowing to RBOC rhetoric. He further stated that reclassifying DSL as an information service will not only relieve incumbents from their unbundling obligations, but will also exempt DSL providers from adhering to emergency communication rules important to the Department of Defense. It could also impede the Department of Justice’s ability to monitor illegal activity using broadband services and would exempt DSL providers of following regulations established to protect disabled persons.
The other two areas of regulation being considered by the FCC right now include the definition of dominant and non-dominant players in different market segments. By defining a carrier as a dominant or non-dominant player, the FCC can determine which of the FCC rules apply to which carrier. This concept was established when the AT&T Corp. (NYSE: T) monopoly was broken up. Back then, when the competitive long distance market was established, MCI (Nasdaq: MCIT) and Sprint Corp. (NYSE: FON) were considered non-dominant players and were therefore not subject to all of the stringent rules to which AT&T was subject. The determining factor in this issue is whether or not the carrier has enough market share to control prices in a given region.
Another major area of consideration is the triennial review of FCC rules. The most hotly contested rule making has to do with line-sharing and unbundling requirements of incumbent carriers. The FCC lost a recent case in the U.S. Court of Appeals for the District of Columbia, in which District Court Justices said the FCC had gone too far in interpreting the 1996 Telecom Act when it outlined which elements of an incumbent carrier’s network should be unbundled. Although the Commission has not officially announced that it will appeal the decision, sources close to the FCC say that the Commission should file an appeal on or before the July 8th deadline.
Abernathy made reference to the decision in her speech today, “It seems clear that the unbundling issue is very complex, but that is not an excuse for a delay in reevaluating these rules. The Commission needs to continue to move forward regardless of Appellate decisions.”
But the truth of the matter is that the outcome of these other issues holds little meaning without first knowing how DSL will be classified.
— Marguerite Reardon, Senior Editor, Light Reading