Competitive Industry Speaks Against BellSouth Forbearance Petition

Competitive ISPs and VoIP providers spoke with one voice, urging the FCC to deny a BellSouth petition seeking forbearance from application of Computer Inquiry and Title II common carrier requirements to the transport component of its broadband services. They said the market for underlying broadband transmission services wasn’t competitive, contrary to the BellSouth claims. They said ILECs retained significant market power in the wholesale telecom services broadband market, and competitive carriers had to acquire such services from them.

The FCC extended the deadline for filing replies in this proceeding to Jan. 28. BellSouth had said it expected many parties would file comments and requested additional time, in light of the intervening holidays, to ensure it can fully respond to the arguments of commenting parties.

Many agreed there was little or no intermodal competition to give competitors an alternative, since satellite, wireless and other technologies have less than 8% of the combined market. Many also said the petition was “premature,” saying the issues it addressed were already before the Commission and should be decided in the broader Wireline Broadband proceeding, rather than a ruling on a single petition. Incumbent LECs and some groups representing rural carriers were about the only parties that urged granting the requested relief.

Several said the FCC didn’t have the legal authority to eliminate the Computer II unbundling rules. They said BellSouth failed to demonstrate that the 3 preconditions for forbearance relief in Communications Act Sec. 10 had been satisfied. “The statute requires an individual review of specifically identified requirements, whereas BellSouth asks for relief from broad classes of regulations, without analyzing or even identifying many of the specific obligations at issue,” the Local Govt. Coalition said.

Retention of the Computer Inquiry and Title II common carrier regulations for broadband transmission services is “necessary to protect consumers by ensuring that they maintain the ability to choose an ISP or VoIP provider other than BellSouth,” CompTel/Ascent said: “It is also necessary to preserve nondiscriminatory access to broadband transmission facilities for competing ISPs and VoIP providers.” CompTel also urged the FCC to give “little or no weight” to BellSouth’s use of Sec. 706 of the Act as an additional basis for granting forbearance. “While BellSouth complains that the Computer Inquiry and Title II common carrier regulations dampen its incentives to invest in new technologies and inhibit broadband innovation and deployment, it has assured investors that it’s continuing to expand its network capabilities to maintain a leadership position in the broadband market and is actively deploying new broadband IP platforms.”

Sprint urged the FCC to deny the petition, which it said was “nothing more than a repackaged version” of BellSouth pleadings in the Wireline Broadband proceeding (02-33), where the FCC is considering whether to eliminate the safeguards adopted in the Computer Inquiry with respect to the provision of broadband facilities. “The record in that proceeding conclusively demonstrates that the elimination of such safeguards would be contrary to the public interest,” Sprint said: “There was near unanimity of opinion across the broad telecommunications sector of the economy that competition in all telecommunications markets, that national security and emergency preparedness, and that the goal of ensuring access to the telecommunications by Americans with disabilities would be imperiled if the Commission were to do away with Computer Inquiry safeguards.”

MCI strongly opposed BellSouth’s request, saying that granting it would be “unwise policy because it would harm competition in the information services market.” It said as the FCC considers this and other BOC petitions for forbearance from regulation of key bottleneck transmission facilities, it should conduct its analysis through a “layers approach,” which distinguishes between the physical layer, where bottlenecks still exist that should be regulated, and the application and content layers, where Internet access exists and which are subject to competition. MCI “strongly” disagreed with BellSouth that the Part 64 cost allocation rules shouldn’t apply to facilities used to provide broadband information services: “Part 64 is perhaps the Commission’s single most important regulatory safeguard to prevent the BOCs from using their non-competitive services to subsidize their competitive services.” MCI also said granting the petition would further reduce the universal service contribution base and would shift contribution obligations for other services.

AT&T said the petition was “stunningly broad” and “totally baseless.” It said if granted, the petition would “not only severely jeopardize the development of a competitive broadband retail market, it would also threaten competition in the market for traditional services.” It said such “sweeping relief” could “totally deregulate BellSouth facilities that competitive carriers must use as essential inputs to a wide variety of traditional basic telecommunications services, particularly to small business and enterprise customers.”

ALTS urged the FCC to reject the petition and instead focus on its rulemaking decisions that consider the appropriate regulatory treatment of broadband services. It said the Commission should provide regulatory relief “where appropriate for retail service offerings only after careful consideration of the records in those proceedings.”

Vonage said the requested relief went “far beyond what could possibly be deemed necessary, prudent or lawful” and “could seriously threaten the marketplace success and attendant benefits to consumers that Vonage has been able to provide.” It said it was “particularly concerned” that the requested relief could “enable LECs to frustrate Vonage’s ability to establish optimal 911 arrangements fo its VoIP customer.” It said although many of its customers used cable rather than DSL to reach Vonage, it “still must coordinate with and receive cooperation from the ILECs to implement an optional 911 solution. BellSouth has already demonstrated its willingness and ability to attempt to leverage its strength in the broadband access market to suppress competition from VoIP providers by refusing to sell ADSL service to consumers who wish to utilize Vonage rather than BellSouth for voice services. Even though BellSouth claims to intend to continue voluntarily to enable its customers to reach certain third-party ISPs, its motives with respect to VoIP providers are clearly suspect.”

“BellSouth petition must be seen for what it is, a self-serving grab at expanding its dominance over the use of its network, and… must be dismissed,” said the Washington Bureau for ISP Advocacy. It said if granted, the petition would “literally put the independent [ISP] industry out of business once and for all.” The group said BellSouth’s initiative was “predictable” and sought to “coerce wildly premature action” from the FCC to “end run the rulemaking process” on Wireline Broadband. “But the Commission’s decision to engage in measured, thoughtful and time-consuming fact-gathering deliberations in [the Wireline Broadband proceeding] does not justify BellSouth’s coercive action.”

The Local Govt. Coalition agreed with MCI that “the Commission should regulate the ‘facilities’ layer for all types of providers.” It said the petition was “premature, the statutory conditions forbearance [were] not met and deregulation of BellSouth’s broadband transmission [was] exactly the wrong response to current market conditions.” It said granting the relief sought in the petition would “merely entrench the existing cable-telco duopoly and undermine long-standing Congressional policies designed to protect the public interest.”

The Information Technology Assn. of America (ITAA) said the BellSouth’s request should be rejected. “The BellSouth petition is a bald attempt to control which Internet Service Providers are able to offer broadband telecommunications services, and the rates, terms and conditions those companies may use to offer such services,” said ITAA Pres. Harris Miller: “Also at issue is how the incumbent will be able to use its commanding marketplace position to cross-subsidize its broadband operations. [Instead of] granting additional relief, the FCC should revisit its recent ruling on broadband unbundling and give broadband consumers the price, performance and selection benefits of true competition.” ITAA also said BellSouth shouldn’t be granted forbearance on the provision of broadband special access services for enterprise customers but rather “should make such services available on just, reasonable and non-discriminatory prices, terms and conditions.”

SBC supported the petition, especially if it acts as a trigger for the FCC to act on other pending broadband related proceedings, such as the Non-Dominance NPRM and the Wireline Broadband NPRM. “Despite the Commission’s repeated musings about the need to reform its disparate regulatory framework for broadband, several years have passed since the Commission launched two key wireline broadband reform proceedings and the Commission’s reform efforts remain stalled in regulatory gridlock,” SBC said: “In light of the Commission’s complacency, it is hardly surprising that BellSouth felt compelled to file the instant petition for forbearance. In fact, much of the Commission action that BellSouth now requests in order to level the playing field with cable broadband providers should already have been taken by the Commission” in other proceedings. It said BellSouth had “fully satisfied the statutory criteria for forbearance and… the Commission should expeditiously grant [its] petition.”

“The Commission is required to eliminate regulations that are no longer necessary to ensure that rates and practices are just, reasonable and not unreasonably discriminatory,” Qwest said. It said while Computer Inquiry requirements alone cost BellSouth $3.50 per customer monthly, “cable modem providers are free to do business” without the restrictions and their associated costs. “The persistent regulatory asymmetry is contrary to the public interest and thwarts Congress’s goal of promoting the deployment of high-speed telecommunications capabilities ‘without regard to any transmission media or technology,'” Qwest said.

The National Exchange Carrier Assn. (NECA) supported the petition, which it said “correctly seeks to align the need for regulation of new advanced services with marketplace realities.” But it said in considering deregulatory options, “the Commission should recognize that nor all ILECs are similarly situated.” NECA urged the Commission to make sure that tariff and pooling options remain available to rural carriers that seek to offer broadband transport services, including basic DSL transmission. The National Telecom Co-op Assn. (NTCA) urged the Commission to “recognize that rural ILECs do not seek the same deregulatory treatment as requested by BellSouth. The Commission therefore should not preclude allowing rural LECs to tariff broadband services as common carrier offerings.”