AMID TELECOM DOWNTURN, COPPS SAYS FCC MUST HAVE MORE OVERSIGHT

FCC Comr. Copps proposed 3-part proceeding Thurs. that would (1) develop strategy for avoiding major telecom service disruptions, (2) determine tactics for how FCC should react when telecom company failed, and (3) assess Commission’s authority to do job. Copps said agency must use its current authority to reduce chances of accounting irregularities, market misdeeds, corporate mismanagement. FCC shouldn’t do job of SEC and protect against securities irregularities, he said, but must reexamine its accounting requirements and reliance on corporate-furnished data in light of revelations at Enron, WorldCom, Adelphia and others. “I'm concerned that when it comes to something like accounting, that we're moving in precisely the wrong direction,” he said. He cited pending further rulemaking proposing to roll back and then eliminate accounting rules. “This is not the time to eliminate those protections. It’s not the time to make it harder for us to audit these companies. It’s not the time to handcuff the states in trying to do their job of oversight, too,” he said.

It wasn’t clear how Copps’ plan would be received by other commissioners. He released his outline first in media briefing in his office. He said he had not yet distributed plan to other commissioners, although there had been much talk in recent weeks about issues it addressed. Chmn. Powell’s office declined to comment. Aide to Comrs. Martin said his office had only just received copy of Copps’ proposal and couldn’t comment because staff still was studying details. Aide to Comr. Abernathy said her office hadn’t yet received proposal. Copps said his plan wasn’t “written in concrete” and he welcomed suggestions on how to address those issues. “I hope that we can put this on as short a track as possible,” he said. “We have to treat an emergency as an emergency.”

Proceeding should determine whether limitations on FCC’s accounting rules were “wise,” since they generally would apply only to dominant carriers, Copps said. He said WorldCom generally wasn’t covered by FCC rules for that reason -- that it wasn’t regulated as dominant carrier. He said Commission should work more closely with state regulators. FCC currently has proposal pending that it no longer collect information for state PUCs. States have proposed Joint Conference on Accounting, but Commission has yet to act on it, he said. FCC last fall streamlined accounting rules for Bell companies, reducing number of accounts they had to report and adding several new categories requested by states to address issues such as pricing unbundled network elements (CD Oct 12 p4). At that time, Copps dissented on further notice that accompanied rule changes, saying he would have preferred even more revisions because it didn’t include all information that states sought to do their job. States had raised concerns about their ability to obtain information for evaluating areas such as charges to consumers and universal service payments.

Copps questioned Commission’s reliance on self-reported data, saying corporate sources had biases and FCC should use its current audit authority “aggressively.” On data gathering, he said FCC already had significant authority to obtain information itself. “I think relying on data that has been furnished by the companies or furnished by accountants is really inadequate.” He said that in some cases FCC might already have some of data and it was question of agency’s “internally cleaning up our own act and making sure we are coordinating.”

Second part of new proceeding should establish “a concrete plan” for how FCC would protect consumers if carrier ceased operation or otherwise disrupted service, Copps said. He said pivotal responsibility of agency was to protect network from disruption to consumers, public safety agencies, military and govt. Commission must reexamine its power over companies’ discontinuing service, he said. It has authority to stop telephone companies from ceasing to provide service for 30 days but he said it might need to have that power over cable and wireless companies and others providing vital information services. He also questioned whether agency should require more notice to prevent such disruption. FCC should establish formal procedures for contacting critical govt. users rather than relying on informal calls and contacts, he said. Copps said proceeding should determine scope of Commission’s authority in that regard, especially in light of fact that some services, cable modem for example, had been placed under regulatory regime of Communication Act’s Title I, rather than Title II or VI.

Third part of proceeding should examine what, if any, additional authority FCC might need to do job and approach Congress if that was case. “If we need new authority, fine, let’s not be hesitant in going up and asking for it,” he said, “but let’s figure out first what authority we have.” Copps said current problems in telecom industry shouldn’t serve as excuse to abandon principle of competition. Saying that some economic theorists believed increased consolidation was cure in such times, Copps said that was not answer, that instead FCC should renew its efforts to promote competition.

Point of proceeding would be to assess potential changes needed in scope of FCC accounting rules and whether agency should do more to gather data independently. Wireless industry had raised concerns in June when FCC opened notice of inquiry on commercial mobile radio service competition to furnish more complete data for next year’s competition report. Industry questioned burden that more extensive reporting requirements would place on sector that carriers said had been shown at Commission to be competitive in first place. Asked about impact of additional reporting requirements that could be imposed on that sector, Copps said: “It’s a question of balance.” That type of balancing was reason why wireless industry was granted additional year to comply with local number portability requirement earlier this week, he said.

Asked whether companies such as WorldCom had been responsive to Commission inquiries in areas such as continuity of services, Copps said most of communication between WorldCom and agency had gone through chairman’s office. Asked whether he found that troublesome, Copps said: “I find it not ideal.”

CTIA Pres. Tom Wheeler said: “While we are still studying Commissioner Copps’ White Paper, most of his proposals are not particularly relevant to the competitive wireless industry and would simply amount to new, costly regulatory mandates for wireless.” He said that while accounting practices “are clearly important, these issues are already being addressed by Congress and the responsible government agencies.”