NYTimes.com Article: F.C.C. Ruling Is Expected to Favor Bells

[Dave Farber <dave () farber net>]

F.C.C. Ruling Is Expected to Favor Bells

February 20, 2003
By STEPHEN LABATON 




 

WASHINGTON, Feb. 19 - Unable to muster a majority of
support, the chairman of the Federal Communications
Commission is preparing to issue a rare dissent over
aspects of the most significant changes in the regulation
of the telephone industry since the Telecommunications Act
of 1996, people involved in the proceedings said late this
afternoon. 

Facing a Thursday morning deadline to complete regulations
on one of the most heavily lobbied telecommunications
issues in recent times, the commission was planning to ease
some rules that require the four large regional Bell
companies - Verizon, SBC Communications, BellSouth and
Qwest Communications International - to lease their
networks and equipment to smaller rivals and long-distance
carriers at low rates.

Officials said that, in a significant victory for the Bell
companies, the agency would eliminate some requirements
that they provide low-cost access to rivals for their new
network equipment used for high-speed Internet services.
Officials say that decision is intended to encourage the
Bell companies to invest in upgrading their networks to
provide their high-speed services more widely.

But the plan falls far short of the complete repudiation of
the old rules as the Bell companies, and the agency's
chairman, Michael K. Powell, had hoped. Instead, what
appears to be emerging will be regulations that give
something to each sector of the phone industry and do not
further hurt the ailing long-distance providers - AT&T and
WorldCom - as they had feared, at least until after the
2004 election. 

If it is not revised in any last-ditch discussions
overnight, the agency's final decision would be a stunning
setback for Mr. Powell, who had proposed a pricing system
that would have been a huge gain for the Bells and a
potential lethal blow for some of their smaller competitors
and some of the long-distance providers.

Mr. Powell's ambitious effort at deregulation was sharply
watered down by a rare agency coup led by Kevin J. Martin,
a Republican who joined the agency in the summer of 2001
after serving as a telecommunications adviser at the White
House, and the commission's two Democrats, Jonathan S.
Adelstein and Michael J. Copps, who had been senior aides
in Congress before joining the agency.

The three commissioners have proposed that the pricing
rules should largely be left to state regulators, who in
recent months have been more aggressive in demanding price
cuts as they try to spur greater competition in their local
markets. The fifth commissioner, Kathleen Q. Abernathy, a
Republican who worked previously as a lawyer and lobbyist,
is expected to vote with Mr. Powell.

Barring a last-minute deal, people involved in the
proceedings said that they expected that Mr. Powell would
issue a rare chairman's dissent on a crucial element of the
plan. They said that dissent, the first time an F.C.C.
chairman has objected to a major agency regulation since
1991, would invite a new round of court challenges to the
regulations, which have already been among the most
litigated aspects of telecommunications law.

The issue before the commission - the review of the rules
that govern how much the Bell companies can charge their
rivals - is one of the most important policy issues in
Washington affecting the competitive landscape of the
telephone markets. The rules were set in place during the
Clinton administration to help promote competition in local
phone markets that critics have said have been monopolized
by the Bell companies.

The regulations required the Bell companies to offer every
element of their networks to rivals at deep discounts. Mr.
Powell had proposed to eliminate that system by, at the
very least, permitting the Bells to charge more for
switches, a central and more widely available component of
the phone network. 

The Bell companies have argued in the courts, in Congress
and before regulators that the rules need to be relaxed
because they are losing market share to cellular phones and
other communications services like e-mail. Their critics
say they continue to dominate wireline voice service in
local markets. 

The defeat would be a significant setback for Mr. Powell as
he begins what he hoped would be a year of reconsidering
many of the most important telecommunications regulations.
It would also signify the rise of Mr. Martin, who
maneuvered around Mr. Powell's plan and is quickly being
seen as a rival for the leadership of the agency.

The two lawyers, who have been viewed as rising stars in
Republican circles, have sharply different views of the
commission's role in the marketplace.

"Powell fundamentally believes in deregulation, while
Martin has articulated a view of devolution - or moving
power away from the federal government toward the states,"
said Blair Levin, a former top official at the commission
in the Clinton administration who is now a senior analyst
at Legg Mason. 

The White House has not publicly weighed in on the debate.


Mr. Powell was said by people involved in the proceedings
to have objected to the proposals by Mr. Martin, Mr.
Adelstein and Mr. Copps to leave the state regulators with
the broad authority to determine what elements of the
network should be provided to rivals at lower rates.

Mr. Powell was described as concluding that some of the
rules proposed by the three other commissioners would not
withstand scrutiny in the courts and would also continue to
discourage investment by Wall Street in the
telecommunications sector and by the sector itself in new
equipment. 

The issue before the commission in its review of the
"unbundled network elements" of the phone system has been
the most heavily lobbied one by the telephone industry in
the last year, as the Bell companies, the long-distance
providers and start-up companies have spent tens of
millions of dollars in lobbying and advertising expenses.

Several Internet service providers and the major equipment
makers, including Intel, Corning and Lucent Technologies,
have also been lobbying regulators and lawmakers on the
issue. 

The equipment makers say that to the extent the regional
bells can charge higher rates they can make further
investments in upgrading their networks, an argument that
has been accepted by officials like Mr. Powell.

http://www.nytimes.com/2003/02/20/business/20PHON.html?ex=1046743915&ei=1&en
=781e15750ca8c65c



HOW TO ADVERTISE
---------------------------------
For information on advertising in e-mail newsletters
or other creative advertising opportunities with The
New York Times on the Web, please contact
onlinesales () nytimes com or visit our online media
kit at http://www.nytimes.com/adinfo

For general information about NYTimes.com, write to
help () nytimes com.  

Copyright 2002 The New York Times Company


------ End of Forwarded Message

-------------------------------------
You are subscribed as interesting-people () lists elistx com
To unsubscribe or update your address, click
  http://v2.listbox.com/member/?listname=ip

Archives at: http://www.interesting-people.org/archives/interesting-people/