FCC Refuses to Deregulate Local Phone Service

While the Federal Communications Commission has moved aggressively to deregulate the broadband market by eliminating line sharing requirements for the nation's carriers, the agency is holding fast to government-imposed regulations in the local telephone market.

In a disappointing vote for Verizon, the FCC unanimously decided Dec. 4 to deny the nation's second largest carrier's request to do away with unbundling rules requiring Verizon to lease local phone lines to competitors at below market rates. The rules are in place to encourage local telephone service competition.

Verizon sought to roll back the rules in Boston, Providence, Rhode Island, New York, Philadelphia, Pittsburgh and Virginia Beach, Va. If the request had been granted, Verizon would have been able to raise the rates charged to local competitive carriers.

Qwest and AT&T are seeking similar rules changes in their own markets.

"Although significant competition exists in Verizon's markets, particularly in Providence and Virginia Beach, the Commission determined based on the specific market facts before us that Verizon's petitions do not warrant regulatory relief," FCC Chairman Kevin Martin said in a statement. "As competition in these markets continues to develop, I am happy to re-evaluate these markets based on updated market facts."

To read more about the court's backing of the FCC in its Verizon broadband ruling, click here.

In his own statement, Commissioner Michael Copps said the Telecom Act envisions more than just a cable-telephone duopoly as sufficient competition. "In this case, the order fortunately finds [that Verizon's request] is inappropriate because the petitioner does not face enough facilities-based competition from the local cable operator."

The decision drew praise from both Verizon's competitors and consumer advocacy groups.

"The FCC's denial continues to advance consumer choice and spurs price competition for the benefit of telecommunications users," Frank T. Matarazzo, CEO of MSTI Holdings, said in a statement. "Verizon remains obligated by law to provide unbundled network elements at regulated prices to competitors in several densely populated metropolitan service areas, including New York City and New Jersey, where MST operates."

MSTI is a communications technology company that specializes in video to the desktop, video conferencing, distance learning, two-way data and Internet access services.

"If Verizon's forbearance request had been granted, it likely would have been too costly for us to obtain the required unbundled network elements to access its networks," Matarazzo said.

Verizon officials disagreed with the decision.

"There's a tremendous amount of competitive choice in Boston in particular," Edward Shakin, vice president and associate general counsel for Verizon, said shortly before the FCC vote. "Competition isn't going to be hurt by removal of these price controls. It distorts the market; it becomes harder to build service for everyone when there are subsidized services that are priced, oftentimes, lower than our cost to do it."

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