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The Other Powell Preps for FCC Vote

On a day when Secretary of State Colin Powell was set to make his big pitch to the U.N., the other Powell -- his son Michael -- was working behind the scenes in preparation for an important telecom regulatory showdown at the Federal Communications Commission (FCC), where he is Chairman.

Next week, the five commissioners of the FCC vote on whether or not to deregulate access to incumbent networks and network elements. Both sides of the battle are honing their political messages in preparation for the vote.

Because Michael Powell has hinted at regulations that would be more favorable to RBOCs, common wisdom holds that he will lead the FCC to find in favor of the incumbents (see Will Powell Pull the Plug?). Industry observers, however, say that the outcome is not likely to be so clear-cut. “I think the RBOCs will benefit,” says Network Conceptions LLC analyst Phil Jacobson, “but not as much as people are thinking.”

At stake in the vote set for February 13 is the fate of UNE-P (Unbundled Network Elements-Platform) regulations, which today require incumbent local exchange carriers to allow competitors access at low, wholesale prices set by the government. While incumbents like Qwest Communications International Inc. (NYSE: Q) and SBC Communications Inc. (NYSE: SBC) insist that deregulation is the only way to ensure new investment in the struggling telecom industry, competitive and long-distance carriers are claiming that the regulations are needed to allow for continued competition in the space (see What's Next for UNE-P?).

A welter of press releases from lobbying groups, interest organizations, and individual telecom companies has been cluttering the wires for weeks, all passionately arguing for why the Commission should find in their favor when judgment day finally arrives (see New Edge Lobbies FCC, Does the FCC Hate Small Business?, CompSouth Asks FCC to Keep Regs, and NMRC Says UNE-P Should Go).

Yesterday, for instance, Verizon CEO Ivan Seidenberg issued a statement asking the FCC to remove the UNE-P regulations so that the carrier can "step on the gas." (See Verizon Urges FCC Deregulation.) Similar sentiments were voiced in a press release last week from Qwest, which offered a proposal to ease a transition away from the UNE-P regulations (see Qwest Proposes UNE-P Solution).

On the other side of the fault-line, AT&T Corp.'s (NYSE: T) chairman David Dorman issued a statement last week urging regulators not to radically change the regulations (see AT&T Defends Existing Competition).

At least one commissioner will probably stand in the way of any one-sided ruling in favor of the Bells, according to Jacobson. “Kevin Martin seems to be the swing vote,” he says. “Where Powell would probably just want to flip the switch, Martin will want to give more power to the states.”

That would be good news for the competitive carriers. While they would certainly prefer seeing the regulations remain untouched, having the states at least partially in charge of the process is preferable to having the FCC run the whole show.

Instead of deregulating unbundled elements across the board, the different states are likely to take a more granular and gradual approach, according to Robert Atkinsen, the director of policy research and special projects at the Columbia Institute for Tele-Information. He says the states will probably be entrusted with managing the transitions away from UNE-P, as well as with deciding where and when different unbundled network elements will come off the list.

"We can expect to see a fairly normal FCC compromise,” Atkinsen says of the upcoming vote, pointing out that each side will probably claim to be the winner.

Both sides insist that the FCC’s decision could either jumpstart the telecom industry out of its current slump or send it spiraling into oblivion.

The Progress & Freedom Foundation, a lobbying group that supports the RBOCs, for instance, published a new study last week claiming that moving away from regulations could add as much as $101.7 billion to GDP by 2005, and could create between 94,000 and 223,000 new jobs per year over the next three years (see Report Rates FCC 'Stimulus Package'). “Conversely,” the authors of the report, Jeffrey A. Eisenach and Thomas M. Lenard, write, “indecision and delay will measurably harm the economy: A one-year delay would cost as many as 223,000 jobs in 2003; delaying for two years would reduce employment by up to 450,000 jobs in 2004; and so forth.”

Not everyone agrees, of course. “That’s a farce. That study is incorrect,” says Maureen O’Leary, a spokesperson for the Competitive Telecommunications Association (CompTel), which represents the interests of competitive service providers. The organization has, according to O’Leary, been lobbying the FCC daily to stick by the UNE-P regulations put in place by the 1996 Telecommunications Act.

"Everybody knows that competition brings about innovation,” she says. “If the FCC’s decision results in killing off the competitive industry, we’re going to see a re-monopolization.”

While opposing sides of the regulatory battle are busy predicting doomsday or salvation scenarios, many analysts insist that next week’s vote may not make much of a difference at all.

"The impact on the top line just isn’t going to be that large,” says i2 Partners LLC analyst Andrei Jezierski. He insists that even favorable regulatory relief to the RBOCs will barely make a dent in their financial difficulties, which he claims have more to do with wireless substitution, dwindling demand, and falling prices, than with UNE-P.

— Eugénie Larson, Reporter, Light Reading
rjmcmahon 12/5/2012 | 12:42:28 AM
re: The Other Powell Preps for FCC Vote If UNE-P is subsidizing competitors, why haven't we seen RBOCs competing amongst themselves? That would be the expected behavior, i.e. sell services on top of a competitors "subsidized" network.

Maybe the RBOCs are lying about the true costs of UNE-P? Maybe they really desire a deregulated monopoly over our communications infrastructure, and telling some "little white lies" is just part of their moral fabric which gets them their winnings?
sealink 12/5/2012 | 12:41:39 AM
re: The Other Powell Preps for FCC Vote I don't think the ILEC's want access to their networks deregulated because they would have to do business with the CLEC's. And also the FCC loses power to the state level as far as they are concerned.
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