FCC Ruling Falls Short

FCC Ruling Falls Short

The Federal Communications Commission last month handed Regional Bell Operating Companies a regulatory windfall that Congress refused to confer, despite three years of aggressive and expensive RBOC lobbying. Having secured from appointed bureaucrats greater changes than the nations elected representatives were willing to consider, logically the RBOCs should be pleased with their win. But theyre not; they plan to sue the FCC.

In a jumbled vote dividing the five FCC commissioners in myriad ways, the agency decided Feb. 20 to let RBOCs effectively bar rivals from using new, broadband facilities deployed in the local telecommunications network.

In addition, in an unanticipated development for ISPs—one that commissioners themselves conceded was a trade-off for maintaining the status quo in voice competition—RBOCs in three years will no longer have to share the data delivery portion of their legacy copper wire with broadband carriers. The move came as a defeat for FCC Chairman Michael Powell, who opposed the decision.

Competitive carriers will likely challenge the FCCs decision on the broadband rules, and RBOCs will almost certainly challenge the decision on traditional telephony rules, sources in both camps said. And while large enterprises are unlikely to feel an effect from the shifting sands, small businesses could see fewer competitive offerings as a result of the decision. Most important, perhaps, the Feb. 20 ruling represents an unseemly chapter of telecom policy-making that nobody wants to see replicated.

The FCCs broadband rule changes largely mirror legislation that RBOCs fiercely fought for on Capitol Hill for three years. Sponsored by U.S. Reps. Billy Tauzin, R-La., and John Dingell, D-Mich., the failed legislation would have deregulated new RBOC broadband investment while preserving rivals access to existing copper wire. RBOCs argued that the FCCs rules forced them to lease parts of their network below cost, hampering their financial ability to upgrade the network infrastructure for advanced broadband services.

The bill spurred an exceptionally expensive lobbying war, complete with radio and newspaper advertising, and dominated the telecom debate in the 107th Congress. RBOCs were able to secure passage of the Tauzin-Dingell bill in the House of Representatives, but they could not overcome opposition in the Senate, and the bill died.

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In a regularly scheduled review of local network leasing rules, the FCC took up the matter where Congress left off. But at the FCC, RBOCs ratcheted up the stakes. Not only did they ask for slack when it comes to sharing portions of the network for broadband services but also when it comes to plain old voice telephony. They sought to undo the requirement to share a set of network elements, known in regulatory jargon as UNE-P, or unbundled network elements-platform. Competitive carriers argued that eliminating UNE-P would drive them out of business. In the end, despite partial dissents from four of the five commissioners—Kevin Martin being the sole supporter of the total decision—a majority approved the broadband changes and left the UNE-P obligations largely intact.

To broadband service providers, the most alarming change was a 3-2 decision allowing RBOCs to stop sharing the high-frequency portions of local copper wire with rivals in three years. Powell and Commissioner Kathleen Abernathy dissented from the decision, warning that it could lead to higher Internet access prices. Even within the slim majority approving line-sharing deregulation, there was dissent. Commissioner Michael Copps, one of the FCCs two Democrats, said he voted for it only to reach a compromise on the other aspects of the order.

"This was an 11th-hour back-room political deal. The Democrats basically sold out broadband competition," said Jason Oxman, assistant general counsel for Covad Communications Co., in Washington. "The amazing thing is that two Democrats succeeded in going further than Tauzin and Dingell were willing to go."

Covad, in Santa Clara, Calif., shares RBOCs lines to provide ADSL (asymmetric digital subscriber line) service to small businesses, but it leases entire lines to provide symmetric DSL to enterprises. The company will likely take the FCC to court if the commission does not modify the Feb. 20 decision and preserve line sharing, Oxman said. "It seems like we have a pretty clear pathway to appeal," he said, noting that in addition to the explicit dissent of Powell and Abernathy, Commissioner Jonathan Adelstein stated that he was not fully informed about what he was voting for.

Covad also partners with voice service providers that rely on the upheld UNE-P framework to provide data services to customers. The company recently signed a deal with AT&T Corp. and will announce similar deals with other voice providers soon, Oxman said.

From the perspective of small businesses, any policy that appears to hamper the fledgling competitive carriers is seen as potentially harmful to users. "Small businesses benefit greatly from being able to use a local ISP for Internet and access via line-shared ADSL," said Jeff Buckingham, president of CallAmerica Business Communications Inc., a Competitive Local Exchange Carrier, in San Luis Obispo, Calif. "The local ISPs offer great customer support and are right there to fix a problem if needed. Now all small businesses who want to use ADSL will be forced to buy from the Bell company."

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