How Four FCC Rulemakings Could Finally Break the Broadband Logjam

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On February 27, after months of acrimonious debate, the House ofRepresentative finally passed a modified version of the InternetFreedom and Broadband Deployment Act of 2001 (H.R. 1542), which wassponsored by House Energy and Commerce Chairman Billy Tauzin(R-La.) and ranking member John Dingell (D-Mich.). TheTauzin-Dingell bill would allow Baby Bell telephone companies toprovide customers with broadband services the same way cable andsatellite companies are currently allowed to, free of theinfrastructure sharing provisions of the Telecommunications Act of1996.

The victory, however, will likely prove a Pyrrhic one for theBells given the limited support the bill has in the Senate.Immediately after the measure passed the House, Sen. ErnestHollings (D-S.C.), a longtime enemy of the Baby Bells andderegulation in general, vowed to kill the bill when it enters theSenate Commerce Committee, which he rules with an iron hand.Indeed, the first hearing the bill received in front of thatcommittee on March 20 saw Hollings and a number of his colleaguesvociferously denounce the measure. Worse yet, no one has yetstepped forward in the Senate to champion the bill as Tauzin andDingell had in the House.

Luckily, however, while broadband deregulation legislationappears mired in a legislative quagmire, the Federal CommunicationsCommission is currently considering four proceedings that couldradically alter the face of modern telecommunications policy forthe better. Although a legislative fix to the broadband regulatorymess would be preferable, these FCC proceedings hold out the hopethat there might be another avenue of reform if congressionalderegulatory efforts falter. These four FCC proceedings are:

* Unbundled Network Element Triennial Review (CC DocketNo. 01-338): This massive rulemaking will examine the list ofunbundled network elements (UNEs) that incumbent local exchangecarriers (LECs) or Baby Bells must provide to rivals at regulatedrates. Under the Telecom Act and subsequent FCC mandates, the LECswere required to share certain portions of their existing localtelephone loops with competitors. Importantly, however, the TelecomAct did not speak to the issue of how services or technologies thatemerged in the wake of the Act would be regulated. TheTauzin-Dingell bill proposes to clarify the law in this regard bycreating a firewall between old voice-grade regulations and newbroadband services, which the bill proposes to free frominfrastructure-sharing requirements. Similarly, as part of its UNETriennial Review, the FCC is looking into the issue of whether ornot it can unilaterally free the LECs from such line sharing andother unbundling requirements when they deploy new broadbandservices.

* DSL Non-Dominance (CC Docket No. 01-337): In this"Review of Regulatory Requirements for Incumbent LEC BroadbandTelecommunications Services," the agency is investigating whetherthe Baby Bells should be considered to hold a "dominant" positionin the broadband marketplace and thus face the same pricing andinfrastructure sharing rules which govern the voice market. Itseems likely that the FCC will have no other choice but to declareBell-provided high-speed digital subscriber line (DSL) services"non-dominant" given that cable companies currently control roughly70 percent of the marketplace.

* DSL as an "Information Service" (CC Docket No. 02-33):On February 14, the FCC opened a proceeding that will "resolveoutstanding issues regarding the classification of telephone-basedbroadband Internet access services and the regulatory implicationsof that classification." This investigation is important because iftelephone-provided broadband is classified as an "informationservice" it would mean that DSL would fall under Title I instead ofTitle II of the Communications Act. Title II regulations, whichcover traditional wireline telephony, impose a host of commoncarriage requirements on companies, including price regulations,interconnection mandates, and unbundling/line sharing rules. Bycomparison, services that are designated "information services" andcovered under Title I face far fewer regulations.

* Cable Modems as an "Information Service" (GN DocketNo. 00-185): A similar proceeding was opened by the FCC inSeptember of 2000, entitled "Inquiry Concerning High-Speed Accessto the Internet over Cable and Other Facilities." The proceedingraised the question of how to define and regulate cable-providedbroadband offerings. Historically, cable firms have not faced thesame sort of infrastructure- sharing mandates on their lines thattelephone companies have. In recent years, however, variousinterest groups and competing companies have been clamoring foropen access mandates for the cable industry to equalize theirregulatory treatment with telephone companies. On March 14, the FCCwisely chose the opposite path. The commission ruled that cablemodem service was an "interstate information service" that would befree of state and local rules and regulated under Title 1 of theCommunications Act. Importantly, the FCC held, "We seek to create arational framework for the regulation of competing services thatare provided via different technologies and network architectures."The commission noted that the broadband market is "evolving overmultiple electronic platforms," and, therefore, the agency will"strive to develop an analytical approach that is, to the extentpossible, consistent across multiple platforms." This is importantbecause it sets the stage for a similar ruling in the previouslymentioned DSL "information service" proceeding.

Viewed together, these four proceedings offer the FederalCommunications Commission and Chairman Michael Powell the chance tomake good on his promise to avoid imposing a heavy-handed commoncarriage model on the emerging broadband marketplace. As Powellnoted in aspeech to the National Summit on Broadband Deployment lastOctober, "Broadband is a synergetic product of two great wavescrashing into each other. The first is the mature and heavyregulated world of communications. The second is the swift andunregulated peak of the computer revolution. The world waits to seewhether the force of the second will subsume the regulatory energycontained in the first. It should and it will if we let nature takeits course and not let the yellow submarine of central planningcome crashing to the surface."

Whether or not Chairman Powell and the commission follow throughwith this bold vision likely depends on what, if any, support hereceives from the Bush administration. Regrettably, a leadershipvacuum exists within the Bush administration on the broadband frontthat has yet to be filled. Aside from some bland generalitiesregarding the importance of broadband, no one in the upper ranks ofthe administration has set forth a coherent broadband policy. Thesefour FCC proceedings offer the Bush team the chance to articulate aclear deregulatory vision and possibly generate a legacy forthemselves as the administration that broke the broadband logjamand provided the legal environment necessary to help spawn a longoverdue communications policy renaissance in America.