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Industry Pushes FCC To Accept Telecom Terms
by Teri Rucker
The FCC is toeing a delicate line as it works to define telecommunications terms that some industry members say could seriously impact their businesses.
When an appeals court rejected the FCC's rules governing how competing firms share the networks of the Bell companies, it castigated the agency for failing to consider the state of competition in a given market and the availability of other network options. As the agency crafts new rules, industry players hope the FCC will accept their interpretation of a more "granular" look at market conditions.
The U.S. Court of Appeals in the District of Columbia this summer rejected the agency's line-sharing rules, saying the FCC "adopted the Line Sharing Order with indifference to petitioners' contentions about the state of competition in the market."
Creating a nationwide list of unbundled network elements (UNE) without considering competitive alternatives to services and to those elements, inflicts an unnecessary cost on the companies and the economy, the court said, noting that "[t]he Commission's naked disregard of the competitive context risks exactly that result."
Months before the court decision, the FCC launched a review of those rules as part of a proceeding called the triennial review. The agency asked whether it should take a more targeted approach to defining specific network elements and whether the type of service, geography or other factor should be considered when formulating those rules. That list of elements is known as the unbundled network element platform (UNE-P).
The FCC also asked how the rules affect some of its other goals, such as encouraging deployment of services facilitating high-speed Internet access, facilities investment or technological innovation.
The commission must take into account the guidance set forth by the court when it issued those rules. In a recent press briefing, FCC Commissioner Kevin Martin noted that the court made it clear that in order to justify the rules, the agency must consider the competitive environment in a given market, how service substitution fits into the competitive equation and the characteristics of a market.
Rather than having a list of network elements available to competitive firms, the FCC must "explain how that list would apply in a given market," Martin said.
Staff at the agency is in the process of crafting new rules and submitting them to commissioners for their approval and has not indicated just what a more "granular" approach to setting network access rules might mean.
Bell Firms And States Define 'Granular'
Bell competitors and state public utility commissions have set their definition of granular. They are pushing the FCC to set broad guidelines and subsequently allow state regulatory bodies to craft rules that apply to each market. They believe the court directed the FCC to do just that.
"The Bells got more than they bargained for" with the court decision, said Russell Frisby, president of the Competitive Telecommunications Association. "Based on the court's discussion, we don't think FCC can make the decision on a national basis. Facts differ from market to market and the only way to comply is for the FCC to set aside basic guidelines and delegate it to the states to apply the facts to the guidelines."
That would mean the FCC would establish general guidelines, but state regulators would analyze the market conditions and then decide whether an element, such as switching, would remain available to competitors.
The National Association of Regulatory Utility Commissioners (NARUC), which represents the state bodies that oversee the telecommunications and energy industries, supported that idea.
State legislatures have set laws that govern line-sharing policy based on specific conditions within a state, said Jessica Zufolo, legislative director for NARUC. "Any efforts on the federal level to undermine state statutes and replace them with less rigorous, less granular federal rules essentially would undermine the wisdom and the success of the state legislatures and commissions who have a better understanding of what is required to truly bring forth competition in these areas."
Agency Copes With State Disparities
Sources familiar with the proceeding say it is unlikely that the FCC would heed the advice of state regulators, noting that it the agency probably would not punt its authority to the states.
That way of thinking suits the incumbent phone companies, such as the Bells and many small rural firms. They think a nationwide list can be justified, and the FCC can do it without delegating authority to state regulators.
What works in a metropolitan area does not necessarily work in a place like Casper, Wyo., said Bill McCloskey, BellSouth spokesman. However, the FCC can tackle the job without deferring to the states, he said.
"We are concerned that if the FCC leaves a lot of the decision-making up to states, we will have 50 different unbundling regimes, which will be very difficult to manage," said an industry source.
A better approach would be for the FCC to undertake a rigorous analysis of the overall market conditions and then select which elements should be available under the pricing structure the FCC established for UNEs. States would continue their oversight role, but they would not choose which UNE was on the list.
"I don't see how FCC can achieve objectives it wants to achieve, such as facilities-based competition, if it allows states to preempt whatever the FCC decides to do," the source said, noting that the FCC specifically must remove access to upgraded facilities used to provide high-speed Internet service from the list of UNEs.
"There is no way you can argue that the phone network is a natural monopoly for broadband," said Larry Plumb, spokesman for Verizon Communications. "There are competitive ways to get the service, so the whole idea of unbundling doesn't apply."
The court agreed when it vacated the line-sharing rules, saying, "[O]bviously any order unbundling the high frequency portion of the loop should also not be tainted by the sort of error identified...."
McCloskey noted that BellSouth is not opposed to sharing its network, including its upgraded network, but the price for access should not be set under the current pricing guidelines.
FCC Has Tough Balancing Act
The FCC will take into account the industry views, but in the end the agency has to find a set of rules that will withstand court scrutiny and balance the public policy goal of promoting competition and a healthy communications industry.
Looking at a granular analysis could mean analyzing it by service specific granularity, by "targeting services, not the actual element or geography," said one source familiar with the proceeding. It also could mean a more detailed, market-by-market approach, but right now the FCC is not saying what it thinks.
"A lot of lobbyists are going in" to the FCC, but "not a lot of information is coming out," quipped one tech industry source interested in the proceeding.
FCC Chairman Michael Powell hopes to resolve the proceeding by the first quarter of 2003. Commissioner Martin is pushing for a resolution as early in the year as possible.
While the industry is anxious for an answer, they seek clear rules that will spark investment. "There are a lot of moving parts in this proceeding," McCloskey said. "The moving parts have to be aligned correctly or the engine of growth that telecommunications has been will not run."
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