N.Y. PSC WARNS AGAINST FCC BROADBAND DEREGULATION PROPOSAL

N.Y. PSC, pioneer in opening local phone networks to competition, warned FCC late last week that Commission’s broadband deregulation proposal could impede state agency’s often-heralded efforts. “New York’s progress in opening markets to competition could be impaired if the Commission prohibits unbundling for Internet access purposes,” PSC said in comments on FCC’s proposal to free Bell companies’ high- speed data services from interconnection and unbundling requirements. “We remain concerned that unless CLECs have access to ILECs’ facilities to provide high-speed Internet access, they will not be able to compete for local service,” PSC said. “The Commission’s tentative conclusion that the transmission component of retail wireline broadband Internet access, when provided over a carrier’s own transmission facilities, is an information service with a telecommunications component is incorrect.”

Vt. Public Service Board said proposal could deny customers “the right to send and receive information of their own design and choosing on broadband wireline facilities.” Customers have that right when they're served by telecom common carrier, but FCC proposal would deny it for broadband, PSC wrote. Transport of local telco’s Internet access obviously is telecom service “and it should be regulated as common carriage,” Vt. regulators said. Wis. PSC said it saw little reason to dismantle current regulation designed to prevent anticompetitive actions by Bells when “there already exists significant broadband capacity that far exceeds demand.” Wis. PSC said FCC’s analysis involved “legal jujitsu by distorting definitional statutes that are written with conspicuous conceptual distinctions.”

May 3 was deadline for comments on agency’s rulemaking that’s seen by Bells as way for them to gain parity with cable companies that don’t face same types of regulations (CD May 3 p4). Proposal, among other things, would revise regulatory definitions and define wireline Internet access as “information service” rather than “telecommunications service.”

Not surprisingly, Bell companies rallied around FCC’s proposal, saying it would eliminate barriers to broadband deployment. BellSouth said current regulatory policies “are there by default and not by good analytical design.” Policies “spawned in a voice world have been forced on broadband services offered by ILECs simply because of the ILECs’ position as local exchange providers in the pre- Telecommunications Act… environment,” BellSouth said. As result, carrier said, telcos are competing against companies such as cable providers that don’t face same regulations: “For no apparent reason other than their status as an ILEC, the Commission regulates but one type of broadband service provider -- ILECs. With the documented amount of empirical evidence regarding competition, the Commission cannot in good faith continue to regulate the ILECs, and only the ILECs, with a heavy hand while all other providers operate with complete regulatory freedom… Limited deployment will occur across the entire broadband market unless the Commission reverses the past course of asymmetric regulation.”

This proceeding “gives the Commission a signal opportunity to move toward a rational and balanced policy for broadband deployment,” Qwest said. “This proceeding, like several others pending at the Commission, addresses how to reconcile the law governing the electronic communications marketplace with the technological and commercial realities of that marketplace,” it said. Qwest said FCC should: (1) “Reaffirm that, just like cable modem service, bundled DSL Internet access service is an ‘information service’ with no ’telecommunications service’ component.” (2) “Affirm that, just like cable modem providers, ILECs may choose to provide bulk broadband transport services to ISPs on a private carriage basis outside the scope of Title 2.” (3) Determine that Computer 2 and 3 rules “have no valid application to the transmission component of bundled DSL Internet access, just as the Commission has found that they have no valid application in the cable modem context.”

Verizon called on FCC to allow telcos same freedom as cable modem providers, which Commission has decided to regulate under less stringent Title 1 of Telecom Act, instead of telcos’ Title 2 common carriage rules. “Current lopsided regulations that favor cable companies are discouraging telecommunications providers from making significant new investment in additional broadband facilities,” Verizon said. USTA said “disparate treatment of ILECs is unjustified and places ILECs at a severe competitive disadvantage to their broadband competitors.” Among USTA’s recommendations: (1) FCC “should find ILEC-provided retail and wholesale broadband services are nondominant and not subject to mandatory tariffing or other dominant carrier regulatory requirements.” (2) “Generally, the provision of wireline, broadband Internet access service over a provider’s own facilities should be deemed to be an information service.” (3) Transmission component of Internet access service offered over provider’s own network is “telecommunications” and not “telecommunications service.” (4) To assure parity, “the provision of standalone broadband transmission to an unaffiliated… ISP should be deemed to be private carrier service and not common carrier service.”

Rural LECs Want Pooling Retained

Despite Bells’ enthusiasm, smaller rural ILECs urged agency to be careful not to inadvertently harm rural telephony when it changed regulatory definitions. OPASTCO said rural LECs needed to retain ability to provide Internet access service through tariff pools, which might be affected by regulatory changes contemplated by agency. “The risk- sharing and cost-recovery attributes of pools are vital to many rural carriers’ ability to provide affordable wireline broadband Internet access,” OPASTCO said. Expressing similar concerns, National Telecom Co-op Assn. said rate-of-return regulated carriers “should be permitted to continue to offer their standalone broadband transport service as a ’telecommunications service’ and tariff it in the interstate jurisdiction.” National Exchange Carrier Assn., which administers tariff pools, said rural telcos should have option of tariffing standalone broadband access services because “a one-size-fits-all approach can’t accommodate the needs of many rate-of-return carriers located in high cost areas.” NECA said rural companies “would find it difficult to deploy broadband services, such as [DSL] without the regulatory and economic assurances provided by NECA’s pools and its interstate access tariff.”

Assn. of Communications Enterprises (ASCENT) said only way broadband services could be interpreted under Telecom Act was as telecom services. If FCC wants to classify them differently, they have to take their case to Congress, said ASCENT, which represents CLECs, including resellers. “The Commission cannot override Congress by regulatory fiat,” it said.

Hundreds of other parties filed comments in proceeding, many of them ISPs and others objecting to another part of proposal that would extend universal service contributions to ISPs, cable modem services and others providing similar services. “Expanding the universal service program to the cable industry would do more harm than good for several reasons,” Charter Communications said. Among its concerns: (1) “Assessing cable modem service would impede cable operators’ continued investment in developing facilities- based, competitive telephony as well as the rapid deployment of broadband facilities.” (2) Cable operators already have built out to high-cost areas, “paying up front with risk capital” so they shouldn’t have to “pay again to fund deployment of these services” by others.