MARTIN TELLS ILECs HE DOESN'T BUY DEREGULATION OF LEGACY NETWORKS

FCC Comr. Martin said Fri. he would be “inclined” to turn away incumbent LEC arguments that they couldn’t build out broadband until they got more deregulation of legacy systems. In a speech at a Practising Law Institute-FCBA telecom conference, Martin said ILECs told the Commission they couldn’t build out broadband infrastructure until they had investment incentives. He said the Commission gave them those incentives in the UNE Triennial Review Order’s broadband provisions so now it was up to the ILECs: “For years, incumbents have been saying ‘Deregulate our provision of broadband and we will invest.’ But now that broadband deployment is deregulated, they are saying ‘Deregulate our provision of historically monopoly service -- basic phone service -- and we will invest in broadband.’ They essentially are saying ‘Free us and we will invest.’ We have responded ‘Invest and you will be free.'”

In a somewhat strongly worded speech, Martin indicated he no longer accepted ILEC comparisons to cable regulation either. Cable providers in the mid-1990s were in a position similar to ILECs, faced with increased competition to their core services from such technologies as DBS, he said. Cable operators were given similar opportunities to enter new businesses, including telephony, and they took the lead, borrowing heavily to invest in new infrastructure capable of providing new services, Martin said. They had been told basically that if they invested in infrastructure needed to enter those new markets, their offerings would face minimal or no regulation, he said. “Incumbent phone companies have the same opportunity now,” he said. They have been given the chance to invest in less-regulated businesses and should do so rather than seek further deregulation of core businesses, Martin said.

Martin said he now would view regulatory decisions through a new “prism,” asking himself: “Are the incumbents seeking the opportunity to invest in their network infrastructure, provide new services and receive the benefits of that new investment? If so, I think the Commission should be encouraging.” For example, he said he would support many of the Verizon’s requests for clarification of broadband deregulation. “While I am not sure that there is the level of confusion about what we meant in recent orders, I agree we should address these issues.” However, he said, he’s “less inclined” to feel the same way about efforts to lessen competition or deregulate the legacy voice network.

Also at the conference an FCC Wireless Bureau official said the agency’s VoIP proposal would be issued in “a month to 2 months,” with a current goal for sometime in Jan. Senior Deputy Bureau Chief Jeffrey Carlisle said the Notice of Proposed Rulemaking wouldn’t be “much of a surprise to those following” the issue because it would focus on: (1) “What is VoIP.” (2) “What level of regulation, interstate or a mix of intrastate and interstate,” is appropriate. (3) What are the implications for universal service, access charges and public safety of the regulatory scheme chosen. Carlisle said the 3 pending petitions for declaratory ruling involving VoIP were good indications of the different ways the technology could be used because they were filed by Vonage, AT&T and Pulver.com. “Different services may give rise to different policy implications,” he said. “You'll see the FCC extremely sensitive to what the services are.” The question of whether to regulate VoIP has become more important because the service has moved to the consumer space, Carlisle said. However, the fact that it now is a consumer service doesn’t mean “automatic regulation” because “it doesn’t make sense to impose regulation until it’s determined if the cost/benefit ratio makes sense,” he said.

The investment community is very interested in VoIP but isn’t ready to fund it until the rules are known, Precursor analyst Rudolfo Baca said. Investors are “cautiously optimistic” about the service, he said.

Regulating VoIP would force it to move peer-to-peer and offshore, speakers said late Thurs. on a panel on Internet developments. Even regulating parts of the Internet would pose problems, so it would be prudent to leave VoIP alone, MCI Vp-Technology Vinton Cerf said. However, Scott Marcus, FCC senior Internet technology adviser, pointed out that at a recent Commission VoIP forum there was a surprising consensus among all commissioners and industry participants that issues such as 911, E911, law enforcement, access charges and universal service had to be dealt with. At the same time, there was a strong sense that the agency needed to move forward with VoIP as fast as possible, he said. The numbering implications of VoIP had to be looked into, said Mindy Ginsberg, dir.-govt. relations of NuStar Inc. There would be no need for phone numbers with the concept of E-Num binding Internet space with the telephone number space, Cerf responded.

On the need for regulatory parity for different services, Marcus said the tendency at the FCC was regulation as light as possible for nascent services and to regulate down rather than up. There are few specific areas in the Telecom Act that tell the Commission to regulate on a technology-neutral basis, he said. As for broadband-over- power-line, Marcus said it was a possible 3rd line into the home. The FCC currently is looking at interference issues relating to BPL, he said. One of the technical challenges for BPL is to get the signals through the transformer, he said. But the ultimate challenge, he said, was for utilities to come up with business cases. They also face a cultural challenge, Marcus said -- getting used to being in a different business. On the lagging uptake of broadband residential services, he said it wouldn’t lend itself to a regulatory fix. While there was a lot of broadband deployment and it was available to 80-90% of the U.S. population, “clearly fewer people take it,” he said. Industry should come up with new nodes and applications that can drive demand, he said.