The FCC issued a long awaited order freezing any changes in the current local access competition rules for six months. During this period, the Commission intends to develop and then vote on a new set of alternative unbundling rules, hopefully overcoming the legal pitfalls that led to the previous Triennial Review Order being vacated by the courts.
Key provisions of the order include:
- First, on an interim basis, it requires incumbent local exchange carriers (LECs) to continue providing unbundled access to switching, enterprise market loops, and dedicated transport under the same rates, terms and conditions that applied under their interconnection agreements as of June 15, 2004. These rates, terms, and conditions shall remain in place for six months.
- Second, it establishes transitional measures for the next six months thereafter. Under the plan, in the absence of a Commission holding that particular network elements are subject to the unbundling regime, those elements would still be made available to serve existing customers for a six-month period, at rates that will be moderately higher than those in effect as of June 15, 2004.
The FCC said it decided to act now, because otherwise the $127 billion local telecommunications market would unnecessarily be placed at risk. Commissioners disagreed as to whether price hikes were inevitable following the six month freeze, or whether a new wave of competition could be kicked off following many years of legal uncertainty. The decision to rewrite the unbundling rules comes nearly eight years after the Telecom Act of 1996. The FCC continues to search for unbundling rules that identify where carriers are genuinely impaired and where overbroad unbundling works to frustrate sustainable, facilities-based competition.
To show he is serious about rewriting the unbundling rules in six months, Michael Powell said he has already scheduled a preliminary vote on new rules at the FCC’s December 2004 open meeting. He predicted that a majority of the five FCC commissioners would be able to reach an agreement.
Michael Powell, FCC Chairman : “I am not a fan of UNE-P as the vehicle for parking our aspirations for vigorous voice competition. It is a synthetic form of competition that would never have proved sustainable, or have provided long-lasting consumer benefits. I believe government policy should encourage intermodal and intramodal facilities-based competition. Bringing some of your own infrastructure to the table allows a competitor to offer a differentiated service to consumers. It allows a competitor to control more of its costs, and thus offer consumers potentially lower prices. A facilities competitor is less dependent on its major competitor for its service–an unenviable position for any competitor. And, a facilities competitor helps create vital redundant networks that can serve our nation if other facilities are damaged by those hostile to our way of life. Facilities competition is real competition and it is emerging everywhere.”
Kathleen Abernathy, FCC Commissioner : “For too long the Commission has given short shrift to the direction provided by the courts in pursuit of a policy of maximum unbundling. Now, we have an opportunity to craft judicially sustainable rules that promote competition in a manner that more fully embraces free-market principles and is less dependent on regulatory micromanagement. While our rules must change, I remain committed to ensuring that bottleneck transmission facilities continue to be unbundled, consistent with our statutory mandate; the challenge ahead is to develop an appropriate framework that distinguishes true bottlenecks from facilities that can be self-supplied or obtained on a reasonable wholesale basis.”
Michael Copps, FCC Commissioner : “The current Commission is on track to butcher the pro-competitive vision of the 1996 Act. And it is sticking consumers with higher telephone rates and fewer choices. The people who pay America’s phone bills deserve better. The majority characterizes this effort as a comprehensive plan to stabilize the market. The truth is just the opposite. In exchange for a standstill today, they commit to price increases tomorrow. After six months of stay, existing enterprise market loop and dedicated transport customers can expect rate increases of 15 percent. The news is even worse for new customers. For enterprise loops and transport, rates will race up to special access. This could mean price increases of more than 300 percent–a potentially lethal blow to any carrier that built its business plan on the core tenets of the 1996 Act.”
Jonathan Adelstein, FCC Commissioner : “After eight years of divisive litigation and a summer of promises, the Commission adopts an approach that prolongs the regulatory uncertainty for incumbents, competitors, and consumers alike. Indeed, the only things that are certain here are that consumer prices will go up and that the telecommunications industry will fight the same old battles come the new year.”http://www.fcc.gov
- In March, a three-judge panel in the D.C. Circuit Court of Appeals overturned the FCC’s Triennial Review Order with regard to network unbundling rules. The FCC rules, which were announced in February 2003 but actually issued in August 2003, empowered state public utility commissions as the decision makers on issues regarding UNE-P unbundling and local competition. The Court of Appeals said the FCC erred by not providing unified, federal guidelines and by pushing many FCC decisions to the states. The court also upheld the Triennial Review Order’s exemption provided to incumbent carriers from unbundling for certain fiber-fed loops and for line sharing.
- In June, the Office of the Solicitor General decided not to appeal the D.C. Circuit decision vacating the Commission’s local telephone unbundling rules. The Solicitor General, Theodore B. Olson, determines the cases in which Supreme Court review will be sought by the government and the positions the government will take before the Court. He was nominated by President Bush and confirmed by the U.S. Senate in 2001.