FCC Struggling To Complete Phone Rules Before June 2

Dow Jones News Service | May 19, 2003 | Mark Wigfield

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WASHINGTON (Dow Jones)--A divided Federal Communications Commission is still struggling to complete before the end of the month key telephone competition rules adopted in concept on Feb. 20.

While some in the agency are optimistic the job will be completed by next week, others aren't so sure. The commissioners are scheduled to vote on a major rewrite of media ownership rules by June 2, possibly making completion of the phone rules difficult before then.

Meanwhile, a trade association representing the dominant local telephone companies said investment is on hold until the FCC releases the new phone rules.

The delay is "an open-ended policy limbo that deepens telecom's fiscal woes and ill-serves the nation," said Walter B. McCormick, president and chief executive of the United States Telecom Association.

In a remarkable Feb. 20 vote, a three-member bipartisan majority of the five- member commission usurped FCC Chairman Michael Powell by granting states more power to slow deregulation of local telephone competition rules. The new rules could allow states to maintain for three more years rules that force the dominant companies like Verizon Communications Inc. and SBC Communications Corp. , BellSouth Corp. to lease their networks to local competitors at deep discounts, a policy hated by the regional Bell operating companies.

The policy is a key one used by two long-distance giants, AT&T Corp. and WorldCom Inc. , for entering local markets and providing more local competition.

But in another section of the decision, Powell was part of a majority backing policies to largely deregulate facilities used to transmit high-speed Internet data, a win for the Bells. The final version of those rules is said by commission insiders to be largely completed.

Staff in the commission's bureaus draft their initial orders to reflect the direction and views of the FCC chairman. When the chairman prevails in a final vote on the rules, which is typical, staff simply polish the draft to released a final, edited version in a month or so.

But because Powell's views were rejected on local competition, staff from the Wireline Competition Bureau had to largely start from scratch to prepare the complicated order. Resentment still remains from the splintered vote, which Powell blasted in a dissent that is likely to become a legal roadmap for future challenges.

One person familiar with the process indicated that the Wireline Competition Bureau staff initially failed to reject the majority's view and took 30 days to do so. After 10 days of editing, the three commissioners returned the rules to the staff, which spent another 30 days rewriting the rules now before the commissioners.

But another person said the new majority, consisting of Republican Kevin Martin and Democrats Jonathan Adelstein and Michael Copps, failed to provide clear direction for the staff. That caused considerable wrangling over language.

In addition, staff are working to make the order as clear as possible, given the inevitable court challenges it will face. These challenges make it unclear how much regulatory certainty the industry will enjoy once the commission finishes its work.

McCormick indicated he's most interested in the release of the broadband portion of the order that was favorable to the Bells.

"Release of the broadband portions ... is a critical precursor to movement on other important proceedings on high-speed Internet services that have been undertaken by the commission," McCormick said. "The failure to act is an abdication of responsibility and is insensitive to the national interest in immediate, near-term economic growth."

A spokesman from the Wireline Competition Bureau said the FCC is "actively working to complete a very complex order, and is expected to do so in the coming weeks."

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Telecom ping.