F.C.C. Discloses New Rules for Telecom Industry

[Dave Farber <dave () farber net>]

> Date: Thu, 21 Aug 2003 23:44:31 -0700
> From: Dewayne Hendricks <dewayne () warpspeed com>
>
>
>
> August 22, 2003
>
> F.C.C. Discloses New Rules for Telecom Industry
> By JENNIFER LEE
> <http://www.nytimes.com/2003/08/22/business/22PHON.html>
>
> WASHINGTON, Aug. 21 - The Federal Communications Commission today detailed 
> the rules the Baby Bells and their rivals must follow in using existing 
> and future telecommunications networks.
>
> The rules elaborate on a contentious F.C.C. decision six months ago that 
> local telephone companies generally must share older equipment for voice 
> transmission at wholesale rates but not newer technology dedicated to 
> high-speed data.
>
> Industry analysts predicted that the long-awaited 576-page order would 
> bolster the telecommunications industry by easing some uncertainty among 
> investors, who have largely waited on the sidelines to see the fine print 
> of the F.C.C. order.
>
> "Investors have been waiting for it," said Scott C. Cleland, the chief 
> executive of the Precursor Group, adding that a lot of deals and 
> investments have been put off.
>
> The order tries to balance two competing goals of the 1996 
> telecommunications act: promoting competition by allowing the Baby Bells' 
> rivals to gain access to local telephone companies' networks while 
> creating incentives for the Bells to invest in new equipment that will 
> encourage economic development.
>
> For example, the F.C.C. gave some incentive for Baby Bells to invest in 
> fiber optics over copper. The Bells are not required to lease their lines 
> at wholesale rates when the line to the consumer's home is made completely 
> of fiber optics.
>
> The final order, a result of a Congressionally mandated review, has 
> pleased almost no one and will certainly lead to a wave of litigation. 
> "Every word will be challenged," said Dana Frix, a telecommunications 
> lawyer with Chadbourne & Parke who often represents the rivals to the Baby 
> Bells. "My children will go to college on this stuff. This is a lawyer's 
> dream."
>
> The four regional telephone companies - Verizon Communications ,SBC 
> Communications Inc. ,Qwest Communications and the BellSouth Corporation - 
> want to shake the obligation of sharing their older voice infrastructure 
> as mandated under the 1996 act. Their competitors, meanwhile, are not 
> pleased to be largely shut out of the Bells' broadband services.
>
> Reflecting the discontent, four of the five commissioners dissented from 
> some parts of the document but approved  others.  Where one commissioner 
> saw the fostering of competition, another saw over-regulation. Only Kevin 
> J. Martin, a Republican who brokered a deal with the commission's two 
> Democrats to form the majority, supported the results in their entirety.
>
> The contentious 3-to-2 vote in February pushed a lot of regulatory 
> authority on the voice market to the states, much to the dismay of Michael 
> K. Powell, chairman of the commission, who was in the minority. The F.C.C. 
> order lays out guidelines for the states to determine whether there is 
> sufficient competition in the voice market to loosen regulations. The 
> F.C.C. requires the states to determine within nine months whether the 
> Bells' rivals continue to face high burdens in establishing a foothold in 
> local markets.
>
> One critical guideline considers who controls the switches - the critical 
> gateways between the main telecommunications backbones and individual 
> telephones.
>
> Under the F.C.C. guidelines, the Bell companies are no longer obligated to 
> offer wholesale rates to competitors when there are at least three 
> competitors serving the consumer market with their own switches, or there 
> are two wholesale companies providing these services to other competitors 
> using their own switches. Officials from the F.C.C. said these thresholds 
> were determined using economic data submitted by various companies.
>
> Mr. Powell said the guidelines leave too much discretion to the states, 
> which, he said, have great leeway in defining markets. "Every antitrust 
> lawyer knows that the outcome of any case is generally won or lost over 
> how the market is defined," he said in a statement, adding that the 
> discretion will cause "gerrymandering" as states strive to maintain the 
> regulation framework to keep prices artificially low.
>
> The Bell rivals, which include the AT & T Corporation , MCI and a host of 
> smaller companies, controlled only about 4 percent of the nation's local 
> telephone lines in 1999, according to the F.C.C. That grew to 11 percent 
> by June 2002, but that nationwide figure disguises wide disparities.  New 
> York leads the trend with more than 25 percent of its local lines operated 
> by competitors, while states like New Mexico and North Dakota have almost none.
>
> Nonetheless, customers in many states are already starting to see the 
> benefits of the forced competition. For example, companies are offering 
> unlimited local and long-distance phone calls for $50 or so a month in 
> some markets. So with the states in the regulatory seat, consumers will 
> see lower phone bills in the interim - even if that is partly brought on 
> by mandatory competition.
>
> Archives at: <http://Wireless.Com/Dewayne-Net>
> Weblog at: <http://weblog.warpspeed.com>

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