VERIZON NOW ‘EXCITED’ ABOUT INVESTING IN BROADBAND FACILITIES

Verizon is more comfortable about investing in broadband facilities based on “clarification” made by FCC commissioners at congressional hearing Wed., Verizon Senior Vp Thomas Tauke said at annual Quello Symposium Thurs. at Willard Hotel.

Tauke’s statement appeared to reflect significant change in position on Verizon’s willingness to build broadband facilities in return for deregulatory measures included in FCC’s UNE order, although officials said company’s earlier statements had been misinterpreted.

Tauke said his company had been concerned about language in news release accompanying FCC’s UNE order that appeared to bar Bells from replacing copper loops with fiber without obtaining state regulatory approval. Verizon viewed that language as “significant disincentive to investment,” Tauke said. However, at House Commerce Committee hearing Wed., FCC Chmn. Powell and Comr. Martin said that language had been misinterpreted, which “allays a substantial part of our concern about the broadband piece,” Tauke said.

In CNN interview after Wed.’s hearing, Powell said wording wasn’t intended to place “affirmative obligation” on Bells to seek state approval before retiring copper loops. It was intended to explain that FCC order didn’t affect any laws that might exist in states, he said. Powell said in interview that incumbents wouldn’t have to continue providing copper loops after replacement by fiber “as a consequence of our decision.”

Tauke told audience that “based on the clarification offered by the FCC at yesterday’s hearing… it appears as if the FCC is removing a substantial barrier to investment in the last mile.” He said that assurance offered Bells “a real opportunity to respond to the market and build broadband capability” and Verizon was “excited” about expanding its broadband capabilities.

Tauke’s comments didn’t address another reason expressed by Bell companies for not building out broadband facilities. After FCC’s vote last week, several Bells said Commission’s decision to continue their UNE-P requirements would sap too much revenue to enable them to invest in new broadband construction. Tauke said his company’s comments about inability to invest were misunderstood. He said Verizon CEO Ivan Seidenberg, among others, had simply pointed out that company’s capital expenditure budget already was set for this year so investment couldn’t be made immediately. Changes can be made in budget but “you just don’t turn on the faucet,” Tauke said.

AT&T spokeswoman questioned reason for Tauke’s comments: “This is not a new position but a change in posture brought about by public criticism at yesterday’s hearing.”

Tauke said other than concerns about loop retirement language, Verizon thought broadband portion of UNE order made “significant steps to removing barriers for investment in broadband.” He said Verizon still needed to develop business case, work with manufacturers, software industry and developers of applications and content, but FCC order was big step forward. On separate portion of order that retained UNE-P, Tauke said moving issue to states only meant more time and more work. He said Verizon wasn’t philosophically against UNE-P and if FCC got rid of pick-&-choose rule, company would be very interested in entering commercial UNE-P agreements. “It’s better that other carriers use our network and we like UNE-P revenue better than UNE-L [loop] because there is more of it.”

On another panel, analyst Scott Cleland said telecom industry had too many problems to attract investors. Glut of competitors may be “feast” for consumers but “if you're an investor, you run for the hills,” said Cleland, CEO of Precursor Group. Among problems from investor standpoint, he said: (1) “Investors hate hypercompetitive industries” with more competition than can be sustained. (2) Internet and data services are undermining voice. (3) There’s “too much debt.” (4) There’s “huge price pressure.” (5) “There was a suspension of common sense” that, for example, allowed WorldCom to “keep doing what it was doing.” Bottom line is simple, he said: “When you have revenue falling and a high fixed cost structure you have bankruptcy and bad investment.” Cleland had harsh words for FCC’s UNE-P decision, saying order was like “medieval doctor” in that it assumed “if the core companies [Bells] are bled enough, the core companies will recover.” Unrealistic economic policy has been replaced with “an era of government policy being irrational,” he said. UNE-P “is like taking candy from a baby, easy money, a gift from the regulators,” Cleland said.

Ore. PUC Comr. Joan Smith said she too saw problems with UNE-P and it eventually should be phased out: “I ask all regulators to be clear and precise with the standards they set so they don’t overly enrich members of the bar.”

House Telecom Subcommittee Chmn. Upton (R-Mich.) told Quello Symposium that “decisions have to be made now” in reaction to FCC’s Triennial Review. “I don’t want to see this gummed up in the courts,” Upton said, but he didn’t specifically mention what type of actions Congress might pursue in response to FCC. “The status quo doesn’t help us,” he said. “I don’t want to see everyone lose.” Upton repeated question he asked FCC comrs. in Wed. hearing on health of telecom industry: “Are we better off than we were 7 days ago?” He said he didn’t have answer: “Time will tell” if decision will benefit or harm telecom marketplace. Upton also said spectrum relocation trust fund legislation would be introduced soon. He said Defense Dept. had argued for some time that it was forced to give up spectrum without being properly compensated. “That’s going to change,” he said.