ECONOMISTS AND CLECs DEBATE FCC BROADBAND PROPOSAL

In teleconferences with reporters scheduled half-hour apart Thurs., CLEC coalition squared off against group of economists over why FCC’s proposed broadband deregulation was bad -- or good -- idea. Today (May 3) is deadline for comments on agency’s proposal to free Bell companies’ high- speed data services from regulatory requirements such as unbundling. Many parties are expected to file comments in what is considered one of most significant common carrier proceedings pending before FCC. Bell companies have complained that it wasn’t fair that cable companies could provide broadband cable modem services without similar regulations.

Coalition of ALTS, CompTel and WorldCom plans to file comments telling FCC proposal is unlawful because it’s attempt to “evade” provisions of Telecom Act that require Bells to share unbundled portions of their networks with competitors. Group also argued that plan could hurt rollout of broadband services, rather than help it, as Bells have contended. “Only when the FCC fully and fairly enforces the existing rules can the broadband revolution reach its true potential,” WorldCom Vp Donna Sorgi said. There’s no proof that current regulations are impeding broadband buildout, coalition will argue in its comments. Group also complained that competitors had depended on unbundling and other regulatory requirements to build their businesses and now FCC was proposing eliminating those rules. “The FCC should not pick winners and losers in the telecom industry [but] unfortunately the FCC’s flawed tentative conclusions do just that,” CompTel Pres. Russell Frisby said.

CLEC group also warned that proposal could offer loophole that would permit Bells to bypass regulations, not just for new broadband services as planned but also for traditional voice services. Bells could do that by bundling information service, such as voice mail, with traditional voice service, CLECs said. By doing so, Bells could make whole package an information service, which would be exempt from regulation, advanced copy of filing said. FCC’s proposal is based on classifying broadband as information service, which is exempt from those interconnection and unbundling regulations.

Economist Alfred Kahn strongly supported proposal and said requiring Bells to unbundle new, “risky” services such as DSL was economically inappropriate. To require incumbent to “take all the risk” and also to share facilities with competitors would be “fatal to risk-taking investment,” Kahn said, and would deter Bells from building out new broadband facilities. He said about 40 economists had teamed up to make filing with FCC -- some, like himself, who had done work for Bells, others who had provided services to cable companies. Group said filing indicated “a growing consensus among economists” on issue. FCC’s proposal could “spur the growth of the ailing telecommunications industry,” Kahn said: “Just as in the case of wireless service, genuine deregulation will generate more competition, give consumers more choices and greater access, foster innovation and, ultimately, stimulate the economy.”

Sue Ashdown, exec. dir. of American ISP Assn., said agency’s proposal would eliminate access to phone networks by independent ISPs. She said independents already had problems with high prices Bell companies charged them for access to networks but instead of dealing with that problem, FCC had “handed independent providers a death sentence.” If Commission proposal is adopted, Ashdown said, “there will be no way to bring broadband to our customers” because Bells wouldn’t have to unbundle their DSL facilities. There’s nowhere else to go because “we can’t go on cable networks,” she said. “The FCC does not appreciate the value that independent providers bring,” she said. FCC’s Notice of Proposed Rulemaking also asked if facilities-based broadband ISPs should contribute to universal service and at our deadline dozens of ISPs had filed comments urging against such action.

Consumer Federation of America official (CFA) called FCC’s proposal illegal. Speaking in conference call with Ashdown, CFA Research Dir. Mark Cooper said FCC’s proposal was illegal because it would reverse Congress’s intent in making distinction between telecom service and information service in Telecom Act. Congress made distinction to assure that telecom regulation wouldn’t be applied to unregulated information services, he said. FCC proposal would use that distinction in opposite way, he said. Commission has proposed to define telecom services as information services as way of deregulating telecom services, Cooper said. That “turns logic on its head,” he said. “It’s quite clear the FCC has assaulted the fiber of the Telecom Act.”

Outlining comments it plans to file today, AT&T said FCC proposal could eliminate any hope of competitive local phone market as well as restrict DSL competition to one provider in many areas of country. AT&T said FCC proposal reflects Bell company efforts “to evade their obligations” through various legal maneuvers that ultimately could stymie voice as well as DSL competition. AT&T also urged agency to make sure Bells’ call for regulatory parity doesn’t “drown out the voices of law, economics and facts.”

USTA Pres. Walter McCormick said USTA’s filing in broadband proceeding would “emphasize 3 simple points:” (1) Local phone companies didn’t have market power in broadband. (2) “Current regulations put local phone companies at a competitive disadvantage in bringing broadband to consumers.” (3) “The FCC has the power to fix this disparity and we will urge them to do so as quickly as possible.” Verizon Vp Don Evans said Verizon also would have simple message -- that agency should “adopt a policy that puts all broadband providers under one regulatory format” whether they be cable, satellite or wireless.