POWELL DOESN'T SEE WORLDCOM SERVICE DISRUPTION AS IMMINENT

FCC Chmn. Powell, in news conference after Tues. agenda meeting, described how Commission was adjusting to economic environment in which telecom bankruptcies were becoming more common. Commission has been examining procedures that allow it to pass information on to other federal agencies “should something come coincidentally into our possession that would raise questions about violations of securities and banking laws,” he said. To that end, FCC is examining proposing formal memoranda of understanding with SEC and potentially other agencies that would help to make routine process by which such information was made available. Powell said such MOU arrangements had been made in other policy areas, including EEOC-related issues. Addressing WorldCom’s scandal, Powell told reporters it didn’t appear that “the possibility of significant disruption of services is imminent. We don’t think the current financial troubles, even if they lead to a bankruptcy situation, present a catastrophic situation for consumers.”

Powell disputed characterizations that agency was largely powerless outside of Sec. 214 to address continuity of service and other issues related to bankruptcy. Under Sec. 214 of Communications Act, companies that want to discontinue common carrier services must seek permission from FCC, which can require service to be continued for minimum of 30 additional days. In letter to Telecom Subcommittee ranking Democrat Edward Markey (Mass.) Mon., Powell said FCC would “greatly benefit from a more definitive and concise statement of its authority to prevent service disruptions for consumers.” He told reporters of “growing concern” that Commission’s Sec. 214 authority dated back to 1930s and didn’t cover certain types of carriers. FCC has been active in bankruptcy court proceedings to ensure that telecom carriers continue services to customers for set transition period, he said. Powell stressed importance of Commission’s “getting on top” of such situations long before Sec. 214 period was triggered. Agency has been “much more aggressive” in watching marketplace to be more aware of when Chapter 11 proceeding might be imminent, Powell said. Commission has been talking with CEOs long before bankruptcy filings to make them aware of their Sec. 214 obligations, he said.

In state arena, Powell described “exhaustive dialog” between state commissioners and FCC on regulatory authority in pending or existing bankruptcy proceedings. “We have evaluated our role in those proceedings and are trying to develop appropriate responses as they become more frequent, as they sadly have for the moment,” Powell said. “States are also working with us in an effort to keep a survey of what the impacts are on both a market-by-market basis and the impacts on their particular state.” Commission is considering whether to hold en banc hearing or some other information-gathering forum on issue in fall, although no final decision has been made, he said.

Of Wall St. Journal article Mon. quoting Powell as saying Commission could allow Bell company to take over WorldCom, he said that didn’t represent “dramatic change in policy.” Previous Commissions approved 2 combinations involving Bell company and IXC, he said, citing approval of Bell Atlantic-GTE merger and marriage of Qwest and U S West. “It’s not somehow the first time this has been contemplated since divestiture, which I heard widely reported yesterday,” he said. “One need only look at our record to note that’s not accurate.” Powell said media attention to his comments on potential WorldCom merger prospects probably stemmed from former FCC Chmn. Reed Hundt’s statement when he was at Commission that such mergers were “unthinkable.” Powell said: “That’s what people are bench-marking that from and I think, frankly, that’s a little sloppy.”

Powell declined to comment directly on statement by House Commerce Committee Chmn. Tauzin (R-La.) Mon. (CD July 16 p1) that FCC that had been too slow to implement changes to jump-start telecom sector. Speaking more generally, Powell said: “We do a lot of things that we don’t choose to make a big fanfare and public relations effort over. I don’t think that is the same thing as not being engaged.”

Powell said FCC had been working with other federal agencies to emphasize role that WorldCom played in U.S. economy and other areas and had urged those in govt. to not “inadvertently contribute to a self-fulfilling prophecy in which the company is harmed” because of reactions of users rather than actions that its executives had taken. He cited current General Services Administration inquiries into whether WorldCom could sign future federal contracts and said such inquiries could be troubling “if that perception is released into the marketplace before the agency is really able to get to the bottom of an inquiry. But they have different responsibilities than I do.”

In letter to Markey, Powell insisted FCC wasn’t “powerless” to protect consumers from service disruption should WorldCom file for bankruptcy. His letter was in response to Markey statements after Powell replied to Markey’s concerns about service continuity in wake of potential WorldCom bankruptcy. Markey said reply indicated Powell “believes the Commission has no authority to step in to protect broadband telecommunications service customers of cable operators.” Powell’s latest reply said there were several “apparent misunderstandings” in Markey’s statement. But while letters involved WorldCom scandal, focus shifted to Commission’s role in Excite@Home bankruptcy. Markey said FCC treated bankruptcies of Northpoint, DSL provider, and Excite@Home, cable service, differently because they provided service over “different wires.” Powell said Excite@Home wasn’t cable provider and therefore wasn’t common carrier, but ISP.

“Because Excite@Home and the services provided by it had never been regulated as carrier services, by this or any previous Commission, any application of Section 214 to Excite@Home would have been an unprecedented and unsupported extension of our authority under that provision,” Powell wrote. However, he emphasized that FCC did intervene in bankruptcy by writing to bankruptcy court urging it to “provide for an orderly transition rather than a precipitous shutdown of Excite@Home, to avoid disrupting broadband service to a significant percentage of U.S. customers.” Powell also said it wasn’t clear whether Sec. 214 applied to any service offered by carrier. “This, of course, is a consequence of the fact that this provision was written in 1934, as part of the original Communications Act, a time where there were no classes of carriers or services.” Powell countered Markey’s assertion that current FCC proceedings sought to remove carrier status from DSL, thus ending FCC’s obligation to ensure service continuity for broadband: “Our ongoing broadband proceeding specifically anticipated the concerns you raise and considers how to continue to protect consumers regardless of the classification of broadband Internet access services.” As part of proposed rulemaking to classify wireline broadband as information service, FCC asked commenters to address extent to which Sec. 214 requirements for continuity of service should be applied to wireline broadband. Powell “invited” Markey and colleagues to “explicitly extend the Commission’s authority to impose discontinuance requirements on other carriers and services within our jurisdiction.”

In news briefing, Powell also sought to put WorldCom financial situation in broader context of overall decline in telecom sector. Day before WorldCom’s financial accounting issues were disclosed, its stock was trading near $1, Powell said. “There was no sector that needed less to be kicked in the gut than the telecom sector at this moment in time.”