FCC Finally Releases Unbundling Rules

Incumbent telephone companies, long distance carriers trying to crack the local market and consumer advocates waited five months for the Federal Communications Commission (FCC) to issue the underlying rules to support February’s landmark decision to allow the Bells to close off their high-speed lines to competitors while continuing to require the telecom giants to share their copper lines.

It may well take another five months to read and interpret the new rules. And, even then, promised lawsuits may further blunt the effects of the rules on the marketplace. FCC Chairman Michael Powell predicted a “litigation bonanza.”

The complex 576-page document issued Thursday by the FCC is meant to provide guidance to the agency’s efforts to hasten the deployment of broadband services. The rules seek to interpret two related but distinctly different issues.

In February, 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 February vote created an odd alliance of the two Democrats on the FCC teaming with Republican Kevin Martin to defeat the efforts of Powell and fellow Republican Kathleen Abernathy to even further deregulate the telecom industry by allowing the Bells to also shut out competitors to their local lines.

The Bells argue the local competition regulations have put them at a competitive disadvantage with cable companies that are not required to share their lines with rivals. They also contend the current rules have stymied investment in new fiber networks and have given the cable companies an unfair advantage in rolling out broadband service. Cable companies currently control almost 70 percent of the U.S. broadband market.

Bell competitors and consumer advocates countered that rolling back the rules would effectively give the Bells a monopoly over high-speed broadband services delivered over telephone lines.

The FCC commissioners Thursday remained sharply divided over the issues.

“There are some important achievements in this Order that have long been objectives of mine — namely, substantial broadband relief,” Powell said in a 17-page statement. “Yet, regrettably, there are some fateful decisions as well that I believe represent poor policy and which flout the law.”

Democrat Michael Copps said: “Seven years ago Congress enacted a sweeping reform of our telecommunications laws. In doing so, it sought to replace the heritage of monopoly with the vitality of competition. Today, we preserve essential tools to foster voice competition in the local market. We accord the states an enhanced role to ensure that voice competition continues to grow. These actions will help us secure lower prices and higher quality services for American consumers. This is the good news.”

The bad news, according to Copps, “is that this decision plays fast and loose with the country’s broadband future. Make no mistake about it, today’s decision chokes off competition in broadband. Consumers, innovation, entrepreneurs and the Internet itself are going to suffer.”

In the absence of time to fully interpret the rules issued Thursday, the major parties to the decision rushed out statements Thursday night and Friday morning that tracked with their original opinions of the February ruling.

“We are in the process of reviewing the 576-page report and need time to fully analyze its effects on our business and customers. Our initial review suggests that the FCC made the right decision in the area of broadband communications – taking a pro-investment and pro-competitive approach to the deployment of new facilities. That’s good for consumers and good for economic development,” said Steve Davis, SVP of Public Policy for Qwest.

Davis added, “However, with respect to the traditional telephone network, we remain disappointed with the majority’s decision to allow other companies, notably AT&T and MCI, to continue to use our network at below-cost rates rather than invest in facilities of their own. It’s unfair to Qwest customers that they continue to be forced to subsidize these giant corporations.”

Verizon’s Tom Tauke, SVP for Public Policy and External Affairs at Verizon, said the rules may already be out of date.

“It took the FCC two years to decide and write the order; we need time to read and understand it,” Tauke said. “The world is changing so fast that the order may already be outdated. Every day it becomes more and more apparent there’s a whole new world of communications around us that connects people in ways that weren’t even imagined just a few years ago.”

Sprint, on the other hand, hailed the decision.

“While today’s lengthy, complex order will require time to review fully, it appears that the FCC has recognized the current reality that competitive local phone companies can’t fairly compete without continued use of UNE-P. The order appropriately gives competitors time to build their customer bases and create a sound financial structure before phasing out their use of UNE-P,” said Tom Gerke, EVP and general counsel for External Affairs for Sprint.

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