Mother of All Compromises?

If it’s true that the art of compromise involves crafting a decision that overall pleases no one but has a little something for everyone, then the Federal Communications Commission (FCC) ruling on local phone and broadband competition Thursday is the mother of all of compromises.

On a sharply divided 3-2 vote, the FCC ruled on two related but distinctly different issues that will have a long-term effect on the tongue-in-the-dust telecommunications industry. In the first decision, the FCC disappointed the regional Bell operating companies by ruling the state public utility commissions can require the Bells to continue lease their copper lines to competitors at steeply discounted rates for at least three more years.

In the second decision, the FCC gave the Bells what they have long sought: regulatory relief from sharing high-speed fiber broadband lines with competitors.

The Bells’ reaction? Verizon , the nation’s largest provider of phone service, decided the regulatory glass was, indeed, half full but contained only warm beer.

“The Federal Communications Commission had a great opportunity today and blew it. Rather than bringing stability, certainty and clarity to the regulatory structure for the industry, the commission left a void and handed off the decision-making to the states,” said Tom Tauke, senior VP for Public Policy and External Affairs for Verizon, commenting on the continuing requirement to share copper lines with competitors.

On the broadband victory?

“The future of telecommunications is broadband, and on this issue the commission appears to have moved in the right direction but may have important details wrong. Moreover, the future investment in the wireline network is tied to a strong financial base for the overall business,” Tauke said.

“I fully expect that Verizon will appeal portions of this order. And Verizon will continue its fight on all fronts — Congress, courts, states and the FCC — for real deregulation and real economic growth.”

Wall Street seemed to ignore the Bells’ broadband win and focused on the local service defeat, pounding the four Baby Bells. Verizon stock was down $1.84 a share (5 percent) to $34.76, SBC slid $1.73 (7.5 percent) to $21.30, BellSouth tumbled $1.54 (7 percent) to $20.60, and Qwest fell 57 cents (14 percent) to $3.48.

Industry trade groups were also divided on the FCC decision. The Semiconductor Industry Association (SIA) and the High Tech Broadband Coalition (HTBC), which represents, among others, the Consumer Electronics Association, the Information Technology Industry Council and the Telecommunications Industry Association, hailed the broadband decision.

“Ubiquitous adoption of affordable broadband in the United States has the potential to transform the way we live, work, learn and play, offering significant new opportunities in telecommuting, telemedicine, distance learning, e-commerce and entertainment,” said George Scalise, SIA’s president. “Increasing the availability and speed of broadband will require significant new investment. The decision today will give companies the incentive they need to lay down that foundation.”

The HTBC applauded the “FCC’s action today to deregulate last mile broadband facilities…we thank the chairman and commissioners for setting a sound and clear demarcation between legacy copper and packetized capacity. The commission’s adoption of the HTBC’s proposal restores incentives that will accelerate broadband deployment and competition.”

The Information Technology Association of America (ITAA), however, said it believes the FCC decision will reduce consumer choice of broadband providers to two choices: the Bells or the cable companies.

“A competitive ISP market has helped transform the Internet into a powerful communications and technology tool for both individuals and organizations, stimulating small business development and benefiting the entire economy,” said Harris Miller, ITAA’s president. “The commission today rejected preserving meaningful choices for ISPs among wholesale mass-market broadband telecommunications service providers, and thereby killed consumers’ chances to continue to enjoy the significant benefits of today’s competitive broadband information services market. Today’s FCC decision for broadband is likely to reduce the number of ISPs consumers can choose from by about 99 percent.”

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