FCC's Martin: Ruling 'Balanced'

As the ruckus following the Federal Communications Commission (FCC)’s February 20 verdict on the future of telecom regulations began to die down, Light Reading caught up with Commissioner Kevin Martin last week to ask him about the controversy surrounding the decision.

Martin was the only FCC Commissioner involved who got his way in every aspect of the ruling. He managed to prevail over the deregulatory agenda for voice networks of his fellow Republican, Chairman Michael Powell, while beating back Democratic opposition to complete deregulation of broadband and new fiber builds. He has since been accused of both backstabbing and staging a palace coup, but Martin insists that he was simply doing his job (see Powell Loses FCC Vote).

"I analyzed the issues on what we had in front of us,” he said. “I think we reached a balanced decision… giving regulatory relief that I think was responsive to the court [rulings].”

Leading up to the FCC’s verdict, it was widely expected that Powell’s stance on voice networks -- which supported incumbent carriers -- would triumph. Powell was pushing to abandon the unbundled network elements platform (UNE-P), which requires incumbent carriers to allow competitors access to key network elements at preset, low, wholesale prices (see What's Next for UNE-P?).

In opposition to this stance, Martin allied himself with Democratic Commissioners Michael Copps and Jonathan Adelstein. The subsequent decision gives individual states the power to decide which areas and markets have sufficient levels of competition to start deregulating some or all of the network elements.

“The courts have told the Commission to bring the decision-making down to a more granular level,” Martin said, pointing out that the barriers carriers face in trying to compete for residential customers can vary greatly from one state to another. There are, for instance, still many areas where consumers have only one option for their local voice services, he said. “I think the states are in the best position to do… the impairment analysis.”

When it comes to broadband, the FCC ruling does not give the states the same level of involvement in the deregulation process. Instead, the Commission caught many observers off guard with its decision to completely deregulate broadband and new fiber builds. This move eliminates the wholesale access to incumbent’s local loops that carriers without their own facilities have enjoyed up to now.

Critics have said the ruling threatens to put a large number of companies out of business and allow the RBOCs to regain a monopolistic hold on the market. Martin disagrees, but he concedes that carriers now offering services leased from incumbents will have to stump up to stay in business (see Covad CEO Sticks to His Guns): “Companies will have to purchase the whole local loop to provide [broadband]."

Martin insists that competition from cable companies will offset any decline in the number of telecom competitors resulting from the broadband deregulation. “In broadband, we’re seeing competition from other facilities-based carriers… And two thirds of broadband services are offered over cable networks… I think the decision is reflective of that… When two thirds of people subscribe to cable, you have to take that into consideration.”

More importantly, deregulation of high-speed Internet should help spur the RBOCs to invest more in next-generation technologies, he says, pointing out that Verizon Communications Inc. (NYSE: VZ) has already announced that it will expand its DSL services, due to the positive effects of the ruling (see Verizon Plans DSL Expansion). “I hope this is going to be the start of rebooting investment in next-generation networks,” Martin said (see Will RBOCs Spend More on Broadband? and Fiber Players Giddy Over FCC Ruling).

The problem with the old system, he stressed, was that many states set the incremental cost competitors had to pay for access to the incumbent networks so low that the incumbents were losing money on the deal. “I certainly hope that providing some relief to the incumbents will facilitate the development of advanced services. I think they’ve gotten a significant amount of regulatory relief for any new investments they make.”

The opinions of what effects the different aspects of the FCC ruling will have on the telecom industry are many and varied, but most observers agree that the long line of lawsuits expected to follow are sure to cause more uncertainty in an already hard-hit market. When asked whether he and the other Commissioners might have reached a less controversial decision, Martin insisted that the ruling they reached was the right one: “This was an issue on the merits. No matter what the Commission did, there would have been lawsuits filed.”

— Eugénie Larson, Reporter, Light Reading

Thanatos 12/5/2012 | 12:18:57 AM
re: FCC's Martin: Ruling 'Balanced' The FCC had a chance to right the prior wrongs and failed to do so. A much anticipated ruling that solved virtually nothing...
lastmile 12/5/2012 | 12:18:57 AM
re: FCC's Martin: Ruling 'Balanced' That is exactly what everyone wanted. That is what the RBOC's wanted. When they got what they wanted the (RBOC's) say this is not what they wanted.
Does any one know what is in the mind of RBOC's?
FCC's Martin is right because he knows that except for POTS, Copper is the most useless entity . Every new technological advance that gets higher bandwidth through that obsolete Copper infrastructure requires a Central Office closer to the destination and that requires money that will get no returns. FTTH is the only solution. Except for the deployment costs, fiber is the least expensive of all the modes of communication. ROI takes time and the RBOC's need to realize this. Let us not blame the FCC.
FCC's Martin has rightly said:GÇŁThis was an issue on the merits. No matter what the Commission did, there would have been lawsuits filed.GÇĄ

Raymand 12/5/2012 | 12:18:42 AM
re: FCC's Martin: Ruling 'Balanced' I don't think they dropped the ball at all.

The FCC has in fact put the RBOC's into the game with a sink or swim mandate. The RBOC's that choose to simply hold onto copper revenues and not invest will be subject to attack.

If instead, the RBOC's invest, then they will be able to count on the returns from their investments and they will subsequently be able to migrate their POTS to a data service offering that they don't have to share.

Everybody Loves Raymand
rjmcmahon 12/5/2012 | 12:18:30 AM
re: FCC's Martin: Ruling 'Balanced' The criteria for bandwidth abundance seems two. First, cut off the legacy supply lines to the incumbants (their tarriffed speech model). Second, prevent the incumbants from building the new supply lines.

The states which understand this will act in an appropiate manner. Let's see what happens.
whyiswhy 12/5/2012 | 12:18:28 AM
re: FCC's Martin: Ruling 'Balanced' All this ruling did was make it nearly impossible to raise money to do anything. Scale makes building infrastructure cheaper. If every state and locality decides to do something different, where do you get scale?

For all those who think this will result in bandwidth in abundance, you are foolish.

Capex is at an all time low.

But hey, that's a fact.

rjmcmahon 12/5/2012 | 12:18:26 AM
re: FCC's Martin: Ruling 'Balanced' All this ruling did was make it nearly impossible to raise money to do anything.

The last round of "raising money" has only gotten everyone into debt and collapsed our equity markets. There have been no real companies created. And most people merely sold a me2 story of low hanging products or services. It was pretty much a joke phase for our industry.

Scale makes building infrastructure cheaper.

The costs of building infrastructure are driven by labor rates. How does scale get around that.

If every state and locality decides to do something different, where do you get scale?

More important is to distribute the costs and put the ownership into the hands of the many. If we put ownership into the hands of a few, there will be no value created. If we want that, we can sign up for Murdoch's satellite TV programming and be done with it (or we can buy an Xbox from Citizen Gates).

PS. Municipalities will follow the lead of others. Let's hope the leaders don't make foolish mistakes like wasting rater payer's money on stupid things like HFC, PON, or Wi-Fi.

Lay the fiber. Minimum is 100Mbs full duplex per premise. Anything less is unacceptable.
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