FCC Ruling Offers Access Compromise; Chairman Not Pleased

Long-distance providers such as AT&T and WorldCom have been trying to offset decreasing long-distance revenue with local revenue. Meanwhile, the four Bell companies,Qwest Communications International, SBC Communications, Verizon Communications and BellSouth,have been battling regulations requiring them to open up their existing networks and new fiber-optic networks to competitors at a discount.

The FCC also voted Thursday to give the states power over local telephone competition rules.

FCC Chairman Michael Powell harshly criticized both rulings.

"I believe this decision will prove too chaotic for an already fragile telecom market," Powell said in a statement. "In choosing to abdicate its responsibility to craft clear and sustainable rules on unbundling to the State Public Utility Commissions, the majority has brought forth a molten morass of regulatory activity that may very well wilt any lingering investment interest in the sector. And, I fear as much or more for CLECs [competitive local exchange carriers] as I do ILECs [incumbent local exchange carriers], for the prolonged uncertainty of rights and responsibilities may prove stifling."

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David Morken, president of communications service provider Bandwidth.com, Durham, N.C., disagreed. "I think this decision is great and wish that the committee continued to allow competitive network access pricing on new infrastructure as well," Morken said. "A monopoly is what it is if others aren't allowed to build out in their territory or get access to their networks. If they had stopped requiring them to open up their networks at a discount, the pricing would go sky-high and there would be no competition, which isn't good for us or the customer."

The Bell companies were attempting to change the Unbundled Network Elements (UNE) requirement mandated by the Telecommunications Act of 1996.

UNE are the parts of the network that the Bell companies are required to offer on an unbundled basis. Together, these parts make up a loop that connects to a DSL Access Multiplexor or a voice switch. The loop allows telcos without local facilities to deliver service without laying network infrastructure.

AT&T called the decision "a difficult compromise."

"We applaud the FCC commissioners who forged a bipartisan compromise to resolve contentious issues that have dogged this industry for more than half a decade," Jim Cicconi, AT&T general counsel, said Thursday in a statement. "While the decision grants the incumbent monopolies far more deregulation than warranted, it also should permit AT&T and other carriers to continue to deliver competitive voice and broadband services."

On the other side of the fence, Steve Davis, Qwest's senior vice president, expressed dismay at the ruling.

"We're disappointed that a majority of the FCC passed on this opportunity to jump-start investment and confidence in the telecommunications industry," Davis said in a statement. "The choice of resale over investment is not in the best interests of consumers, investors or the economy."

Uncertainty in the telecom industry, which has stifled new investment and limited access to capital in the past two years, will go on because of the FCC's decision, Davis said.

Powell also said he "fears" that the resulting uncertainty created by a state-to-state decision vs. a national one could cause telcos to cut more jobs, capital expenditures and stifle future investments.

Powell said he felt that decision would create chaos as states start proceedings to evaluate what elements will be unbundled and made available to CLECs.

"These decisions will be litigated through 51 different federal district courts," Powell said. "These 51 cases will likely be decided in multiple ways, some upholding the state, some overturning the state and little chance of regulatory and legal harmony among them at the end of the day."

Powell's statement also criticized the decision to favor regulatory management of incumbent networks.

"Today's decision clearly steps back from a pro-facilities policy by favoring extensive regulatory management of incumbent networks to supply the competitive market," he said. "More distressing than giving facilities providers the back of their hand, I see no meaningful federal policy put in its place, other than vague and solicitous pronouncements about the states playing the lead role in making these determinations and a commitment to 'competition,' no matter how anemic."