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FCC Sides With Verizon

The enforcement bureau of the Federal Communications Commission (FCC) recommended late Friday (April 11) that the agency deny a complaint by three major MSOs alleging that Verizon Communications Inc. (NYSE: VZ) was using illegal methods to retain phone customers.

But the battle is far from over. The bureau also recommended that the FCC promptly issue a Notice of Proposed Rulemaking (NPRM) regarding "consumer and competitive benefits of retention marketing practices." [Ed. note: Well, that'll learn 'em.]

On Feb. 11, Comcast Corp. (Nasdaq: CMCSA, CMCSK), Time Warner Cable Inc. (NYSE: TWC), and Bright House Networks lodged an "Accelerated Docket Complaint" with the FCC, alleging that they had lost "thousands" of cable voice customers due to Verizon's "unlawful retention marketing practices."

The complaint claimed that the telco tries to induce customers to cancel their orders and stay with the carrier while telephone number ports are still pending. While the FCC authorizes LECs to use “win-back” campaigns after the LEC executes the carrier change, it’s unlawful to enlist them before the change is made, the MSOs argued. (See MSOs Sue Verizon.)

In its recommended decision, the FCC enforcement bureau said, in part, that it was unclear whether Verizon's actions violated section 201(b) of the Communications Act, which prohibits "unjust and unreasonable" practices.

"The Commission does not yet have a consistent policy with regard to retention marketing," the FCC noted. "In the situation Verizon describes -- where two facilities-based providers are competing for the same customer -- it is not at all clear to the Bureau whether retention marketing should be allowed."

The suggested NPRM would seek comment on whether the FCC should adopt specific rules addressing certain retention tactics and practices.

Tit for tat
Last month, Verizon filed a petition of its own with the FCC, claiming that cable operators are hindering the telco from signing up video subscribers. (See Verizon Asks FCC for FiOS Help and Tit for Tat .)

Verizon earlier had argued that the cable complaint was an attempt by MSOs to stifle or block competition, and all but repeated that position in comments following Friday's FCC staff recommendation.

Two of the MSOs involved in the case said they will weigh their options.

Although cable can still plead its case to the FCC commissioners, "we believe Verizon now has the inside track in the complaint proceeding, given the staff recommendation, which appears to have the backing of Chairman Kevin Martin," the analysts at Stifel, Nicolaus & Co. Inc. wrote, in a research note. "The full Commission decision could still be challenged in court."

Depite that possibility, the firm expects that AT&T Inc. (NYSE: T), Qwest Communications International Inc. (NYSE: Q), and other incumbent telcos could begin their own retention marketing for phone subs, "assuming Verizon does not get slapped down by [the FCC] commissioners."

— Jeff Baumgartner, Site Editor, Cable Digital News

fgoldstein 12/5/2012 | 3:43:27 PM
re: FCC Sides With Verizon The recommendation has to rank as some of the most blatantly, shamelessly prejudicial "regulation" ever written. It uses hugely tortured "logic" and constructs to find for the ILEC at every possible turn.

The complaint notes that a CLEC (cable) can't port a phone number without notifying the porting-out company (in this case Verizon). That information is not supposed to be used except for the purpose of providing telecommunications service. The recommended decision is based on what that is. Since the porting-out company wants to continue to provide service, it's okay to use it to market (win back). Huh?

Then they claim that the cable companies don't have standing because their affiliated CLECs are not the companies with the final end-user relationship. The CLEC arms place the ports on behalf of the cable arms, which deal with the end users. Thus the CLECs' customers are not the end users, but the cable companies. So they lose whatever rights they might have had. And since they're not selling to the mass market, they're not common carriers. Huh?

And for good measure, they call for new rules to regulate cable winbacks, claiming that for video, cable and ILEC should be regulated the same. Of course when an ILEC takes a cable subscriber for its video service, they don't have to first get the cable company's advance permission to port a number. It's not the same thing -- they can turn on service and then notify the cable company after the fact. But that sort of detail takes a back seat to "level playing field". Very selectively level.

This sort of logic, by a fast-rising K-Mart appointee, seems to be Babyface's attempt to fight even the dial tone duopoly, with an apparent goal of an ILEC monopoly. Truly, deeply warped.
paolo.franzoi 12/5/2012 | 3:43:26 PM
re: FCC Sides With Verizon
Although I have disagreed with you many times (for example I saw no value in CLECs), I agree with you here.

seven
rjmcmahon 12/5/2012 | 3:43:23 PM
re: FCC Sides With Verizon I'm reading Upton Sinclair's Oil which the movie "There Will be Blood" is loosely based. It's a nice book that shows how similar we are to those who lived about a century ago.

Anyway, an oil magnate treats regulatory capture as part of daily business. For example, he doesn't like to pay for roads to his oil fields so he bribes local politicians to build them for him. In one town he needs a new road built but due to previous abuses the usual road construction funds are being watched by a citizen oversight committee. The local official, a county road commissioner, knowing that the oil magnate butters his bread and not the citizen oversight committee, stages an accident such that a local citizen using the "goat trails" sues the county for unsafe roads. The press jumps all over it printing how the county needs to build these roads for its own citizens. The oil magnate chuckles while remarking to his son, "Now that's how government really works!"
DarkWriting 12/5/2012 | 3:43:22 PM
re: FCC Sides With Verizon Ah, RJ's book nicely describes the difference between a Republican and a Libertarian.

DW
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