Telephone Regulation More In States' Hands: FCC

The four regional Bells don't have to share any high-speed broadband networks they build, and won't be forced to offer broadband fiberoptic lines to competitors at discounts - but they'll still have to open their telephone lines to competitors looking for a piece of the action, the Federal Communications Commission decided Thursday.

In a ruling that basically decided the states far more than the Feds will decide whether and how far to regulate telephone competition, the FCC ruling was anything but unanimous. The vote went 3-2, with FCC chairman Michael Powell accepting the compromise but criticizing it for giving up too much to the states while maybe adding more than eliminating consumer pocketbook burdens.

"The new framework provides incentives for carriers to invest in broadband network facilities, brings the benefits of competitive alternatives to all consumers, and provides for a significant state role in implementing these rules," the FCC said in a statement following the ruling.

Groups like Citizens Against Government Waste were pleased with the ruling. "(C)ommon sense prevailed over corporate welfare at the FCC today," said CAGW president Tom Schatz Thursday. "This is a prudent compromise that will help preserve local phone competition, while forging a strong decision-making role for the states."

The ruling keeps several critical parts of the 1996 Telecommunications Act intact while preserving market competition, CAGW said. The ruling came despite feverish pressure from House Energy and Commerce Committee Chairman Billy Tauzin to eliminate line-sharing by the Bells, a position Powell shared. But without fellow commissioner Kevin Martin to play a "key role," Schatz said, the compromise might not have come as it did.

Martin called the ruling a principled and balanced approach. "It ensures that we have competition and deregulation," he said. "We deregulate broadband, making it easier for companies to invest in new equipment and deploy the high-speed services that consumers desire. We preserve existing competition for local service - the competition that has enabled millions of consumers to benefit from lower telephone rates. And we continue the strong role of the states in promoting local competition and protecting consumers. Finally, we accomplish these goals in a manner that is consistent with the statute and the rulings of the courts."

"He showed leadership and clear thinking at a time when it was badly needed," Schatz said of Martin. "On the other hand, Chairman Tauzin made the wrong choice by holding private meetings with Commissioners Martin and Kathleen Abernathy seeking to exert his considerable political clout in an effort to get the FCC to 'reevaluate' its position." Schatz said Tauzin never held a public hearing with colleagues to allow questioning of the entire FCC including Powell, "and thereby excluded the views of opponents of the Bell monopolies."

Those opponents included the American Association of Retired Persons, the American Conservative Union, the International Brotherhood of Electrical Workers, and other consumer and business groups.

Powell said he accepted the compromise but remained unhappy with the majority decision to remove line sharing "as an unbundled network element."

He said broadband deployment is "the most central communications policy objective" of today. "(W)e at last put some substance into that stated goal," he said. "I am proud to say that today we take some vital steps across the desert from the analog world to the digital one. Today's decision makes significant strides to promote investment in advanced architecture and fiber by removing impeding unbundling obligations. The digital migration journey is one step further along."

But Powell said that, aside from most FCC policies promoting the goals of the Telecommunications Act producing what he called little yield, line sharing still has "clear and measurable" customer benefits.

"It has unquestionably given birth to important competitive broadband suppliers," he said. "That additional competition has directly contributed to lower prices for new broadband services. By some estimates, 40% of DSL providers use line shared inputs. The decision to kill off this element and replace it with a transition of higher and higher wholesale prices will lead quite quickly to higher retail prices for broadband consumers."

He also called "ill-conceived" the concept that removing line sharing equals positive regulatory relief and a stimulus to broadband.

"Line sharing rides on the old copper infrastructure, not on the new advanced fiber networks that we are attempting to push to deployment," he said. "Indeed, the continued availability of line sharing and the competition that flowed from it likely would have pressured incumbents to deploy more advanced networks in order to move from the negative regulatory pole to the positive regulatory pole, by deploying more fiber infrastructure. This decision actually diminishes the competitive pressure to do so."

But his disagreements didn't sway him from hoping for the best out of the ruling.

"(I)t is the fair result of a democratic institution in which majority rules," Powell said. "I also recognized that state (public utilities commissions) will now have an enormous task before them, and I sincerely wish them the very best as they struggle through what the FCC could not."

FCC commissioner Kathleen Abernathy was also uncomfortable with the compromise ruling. "The decision to make only vague presumptive findings on switching impairment and to delegate virtually unlimited discretion to state commissions abdicates our statutory responsibility," she said. "This approach is also inconsistent with the goals of promoting regulatory certainty and facilities-based competition."