News Release

February 20, 2003

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FCC's Regulation Decision Will Further Harm Telecom Industry
Votes to shift more control of telecom industry deregulation to state utility commissions

Adam D. Thierer, the Cato Institute's director of telecommunications studies, has released the following statement in reaction to the decision of the Federal Communications Commission on Thursday to shift more control of telecommunication industry deregulation to state utility commissions:

"The FCC's decision constitutes one step forward, but two steps back on the path toward genuine free market deregulation of the United States' telecommunications industry.

"This complicated proceeding -- which examined the unbundled network-element platform that the "Baby Bells" must provide to competitors at regulated rates -- provided the FCC with the chance to significantly revise infrastructure-sharing rules put in place by federal and state regulators in previous years. Such rules are the FCC's preferred short-term method of encouraging entry by offering competitors generous discounts to network elements owned by the Baby Bells.

"These rules rested upon the mistaken notion that competition would not have developed in local telecom markets in the short-term. On the contrary, credible threats already exist to the traditional dominance of the Baby Bells from cable and especially wireless providers. In the future, such facilities-based alternatives will continue to develop, but the Commission's unbundling and infrastructure-sharing rules may be slowing their arrival since it has encouraged competitors to share existing networks and technologies before deploying new facilities of their own.

"Regrettably, today's decision by the FCC did little to alter this balance. Indeed, the Commission's order is a contradictory mix of half-hearted reforms. For example, while the decision carves out of the regulatory mix high-speed fiber optic lines to the home to ensure that the Baby Bells are not discouraged from deploying such broadband facilities, the order also demands that `dark' fiber line continue to be shared. Many other mandatory sharing regulations remain in place.

"Worse yet, what little good might be accomplished under today's order will be almost completely undercut by the Commission's decision to delegate virtually unlimited discretion to state regulators in determining future telecom infrastructure-sharing rules, resulting in a balkanized telecom policy led by 51 different state regulatory offices.

"Finally, with today's ruling, the FCC risks forcing yet another round of costly litigation because it merely tweaks the previous rules that the courts have already struck down before. In all likelihood, the courts will once again strike down the Commission's rules and require another revision of them. In the meantime, genuine deregulation and facilities-based competition has once again been placed on hold by an FCC that clearly has little faith in the free market."