Skeptics Question RBOC Victory
Yesterday a U.S. Appeals Court ruled against some large chunks of the Federal Communications Commission (FCC)'s Triennial Review (see Courts Overrule FCC Again ). The highlight of the order was that the FCC doesn't have the legal authority to let the states set the prices that local carriers can charge long-distance operators to access their networks.
That bit of news initially gave a lift to RBOC stocks, as incumbent carriers were viewed as the clear victor in the proceedings. But as the complexity of the decision has set in, the regulatory skies have grown cloudy once again.
Today it became evident that more legal battles are in the cards, as the opposition will launch an appeal effort. The FCC commissioners who backed the savaged portion of the Triennial Review -- Jonathan Adelstein, Michael Copps, and Kevin Martin -- say they'll appeal the D.C. court's decision to the Supreme Court.
In addition, with the technology pace of the telecom world picking up, it's not clear that regulation of UNE-P line sharing, which primarily involves legacy circuit-switched voice traffic, will matter as much in the future. Some analysts have noted that the rise of packet-switched technology such as VOIP has already made line sharing somewhat irrelevant (see FCC Rules on VOIP – Sort Of, Light Reading Launches VOIP Directory, and VOIP to Star at FCC ).
"VOIP, wireless and cable competition is making the current regulatory structure obsolete," write analysts at CIBC World Markets, in a note to clients. "The RBOCs have already lost approximately 25 percent of local access market share and are losing 4 percent per year, by our estimate, and new technologies are accelerating."
So what the FCC has managed to do, as investors signaled today, is continued down the path of regulatory uncertainty.
"The political and legal implications of the decision are simply unclear at this time... though we concede that the decision introduces further uncertainty into the marketplace for competitive providers of local service," says attorney Dana Frix, the co-chair of Chadbourne & Parke LLP’s telecommunications and technology practice.
Shares of Qwest Communications International Inc. (NYSE: Q) fell $0.14 (2.90%) to $4.69; BellSouth Corp. (NYSE: BLS) dropped $0.21 (0.73%) to $28.60; Verizon Communications Inc. (NYSE: VZ) slipped $0.51 (1.29%) to $38.95; and SBC Communications Inc. (NYSE: SBC) gave back $0.28 (1.10%) to $25.20 in late afternoon trading on Wednesday. — Phil Harvey, News Editor, Light Reading