COMR. ABERNATHY SAYS VoIP IS RIPE FOR FCC AT THIS POINT

With questions about Voice-over-Internet Protocol (VoIP swirling in the industry, FCC Comr. Abernathy told the Goldman Sachs Communacopia conference in N.Y.C. Wed. that the time was now for the Commission to look at the technology and see where it fit into the regulatory scheme. Several companies, including some phone and cable providers, would like to know whether VoIP will be part of the Universal Service Fund, for example, before pushing forward with long- term business models.

It appears regulatory restraint is warranted on VoIP at this point so the new technology could develop, Abernathy said. “You don’t want to kill it off too soon,” she quipped. But she indicated for the first time that the technology -- long talked about -- finally was ripe: “We are rapidly approaching that stage where we will have to make a decision. It now looks like the technology is there.”

Whether the Commission would choose to examine VoIP in a rulemaking or through an en banc informational type proceeding was unclear, Abernathy said, but FCC officials are discussing that. She also pointed out that Chmn. Powell, not she, controlled the agenda. Nevertheless, she expressed optimism the FCC would move to tackle the issue soon because it didn’t want to fall too far behind the industry. “Now that we know there are companies out there doing this, it is time,” she said.

Abernathy reiterated her displeasure with major parts of the Triennial Review Order She also addressed the debate on the use of the Universal Service Fund and how the FCC should use it to help spread deployment in rural America. She said the incentive scheme over the long term was “not viable” and the FCC needed to make a decision about how many rural carriers “we are willing to subsidize” in any given market. Asked whether there was a legal basis for choosing an arbitrary cap, Abernathy replied flatly that there was none but a line had to be drawn somewhere. On wireless number portability, she said she expected the Commission to release some clarifications of the rules this week, providing guidance on the implementation issues involving porting numbers. She anticipated “bumps and glitches” at the start but said that was to be expected. The FCC, she said, will go after carriers that try to subvert the process but said it also wanted to do some consumer outreach and education so consumers would know what they could expect.

BellSouth CEO Duane Ackerman told the conference earlier in the day that he was pleased with the transfer of appeals to the FCC’s Triennial Review Order (TRO) to the D.C. Circuit from the 8th Circuit in St. Louis. “We believe that is good news because the D.C. Court of Appeals has been pretty clear about their views of the implementation of the Act,” Ackerman said. He reminded analysts that BellSouth and other RBOCS had joined in a petition for forbearance. “We believe access charges should flow to the carrier responsible for maintaining the network, not the UNE-P carriers who have no network maintenance responsibility,” he said. BellSouth, meanwhile, is preparing to run a state-by-state campaign. “We will be well prepared for these state proceedings, and we will present solid supporting evidence to challenge claims of impairment,” Ackerman said. TELRIC pricing also is an area of concern, he said, but BellSouth is optimistic.

On the broadband section of the order, the results were mixed, Ackerman said. “These rules reduce the visibility a company needs to invest in the near term,” he said. In the broadband docket, BellSouth is pushing for regulatory parity between cable and DSL. He said BellSouth executives weren’t terribly surprised by the contents of the TRO when it finally was released. The UNE-P section of the order was more or less “what we anticipated,” he said. “Our market strategies, in fact, will reflect that expectation.”

AT&T CEO David Dorman said that despite the court decision to move the TRO case to the D.C. Circuit, “we believe UNE-P will continue to be around for quite some time.” He said the company had more than 1 million small business bundles based on UNE-P.

Nextel CEO Tim Donahue said wireless number portability would create some “bumps in the road” in terms of increasing churn at first but he believed that in the long run his company would be a “net beneficiary” of customers’ “porting in,” rather than out. “We are ready. We have all our processes in place. It will be rough for a couple of months,” he said. Asked about the company’s spectrum swap proposal at the FCC, Donahue said company executives still were “very optimistic” that the Commission would see it favorably. “I think they have come to the conclusion that rebanding is necessary,” he said, so it’s a question of how that’s done. “The plan may change to some extent. We just don’t know at this point,” Donahue said.

Verizon Vice Chmn. Lawrence Babbio said his company viewed the TRO “as a major disappointment” and would fight the parts it didn’t like “with every weapon that we have.” He said the FCC’s decision “clouds up the near-term horizon” but ultimately wouldn’t affect the company’s long-term goals. Babbio said Verizon intended to make number portability easier for its customers. Sprint Chmn. Gary Forsee said “waiting for the perfect regulatory environment” wasn’t part of his business plan. “We can be a victim. We can wait for the FCC to provide the perfect answer,” or not, he said. Forsee and others pressed for regulatory clarity on portability and said he expected that soon.