FCC Releases Rules on Local Phone, Broadband Competition

The FCC late yesterday afternoon released the long-awaited rules, after six months of fine-tuning a vote that sharply divided the commission.

The Federal Communications Commission late yesterday afternoon released long-awaited rules on local telephone competition and broadband network deployment, after six months of fine-tuning a vote that sharply divided the commission. Affected parties are still trying to understand the 576-page document, but it is clear that neither incumbent telephone companies, nor their rivals, nor consumer advocates are entirely pleased with the order.

Calling the multi-faceted order "chaotic" and "a litigation bonanza," FCC Chairman Michael Powell dissented to a hefty portion of the decision and said it likely will be challenged in 51 district courts and decided in multiple ways. The FCC voted on the new regulations in February as part of a "triennial review" of its rules, but significant portions of the decision were not drafted ("in earnest," according to one commissioner) until after the vote. Because of the complexity and controversial nature of the rules, it took the commission six months to prepare them for public release.

The order deals with the obligations of incumbent telephone carriers (namely the Regional Bell Operating Companies) to lease parts of their networks to new entrants at discounted rates, and it addresses the traditional voice services network and new fiber-based deployments for broadband services separately. Overall, it is widely considered a victory in the long run for the Bells, as telecom services move increasingly toward fiber-based transport.

For network elements regarding voice services, overall the FCC refused to undo the Bells obligations. However, in the medium-to-large enterprise market, the commission found that the obligation is not necessary, but gave state regulators, who are closer to the local markets, three months to disagree if they so choose. If the FCCs finding is not challenged by the states, the Bells would no longer have to offer discounted access to rivals for business customers using DS-1 line capacity.

The Bells had lobbied vociferously to undo their entire obligation to offer discounted network elements—most controversially, circuit switching—but Republican FCC Commissioner Kevin Martin joined Democratic Commissioners Michael Copps and Jonathan Adelstein in refusing to dismantle the rule.

Powell and Commissioner Kathleen Abernathy took their fellow commissioners to task, arguing that preserving discounted switching was not necessary and could discourage the build-out of competing facilities.

For broadband services, the rules relieve the Bells and other incumbents of having to offer rivals discounted rates when it comes to leasing new fiber network elements. The proponents of broadband deregulation, including Powell, argue that it will promote investment in new facilities. However, critics said it could lead to the re-monopolization of local broadband services.

Charging that the deregulation "plays fast and loose with the countrys broadband future," Copps said that small businesses could end up without competitive choices or prices.

"This is not a brave new world of broadband, but simply the old system of local monopoly dressed up in a digital cloak," Copps said.

The order also addresses "line sharing," which pertains specifically to competing digital subscriber line services. The commission is gradually eliminating the Bells line-sharing obligation, but it grandfathered Covad Communications Inc., the largest independent DSL provider. Powell, who said that line sharing was the FCCs most successful broadband policy, said that eliminating the obligation could reduce competition.