Sifting through the FCC order

The FCC’s recently issued order on local telecom competition is a reasonable step forward but might be undermined by the litigation it invariably will inspire.

The FCC’s recently issued order on local telecom competition is a reasonable step forward but might be undermined by the litigation it invariably will inspire.

Cementing positions the FCC first aired in February, the 576-page order changes rules set forth in the Telecommunications Act of 1996 to spur telecom competition. Industry developments, technology advances and legal challenges mandated the changes, the FCC says.

But nothing as complex as trying to direct the telecom market comes easy, as evidenced by the internal bickering of FCC commissioners. Footnotes are used to criticize Chairman Michael Powell, who dissented with the majority on many points of the order. One note, for example, calls Powell “simply wrong,” and another says, “We are at a loss to understand his complaint.”

Most of the controversy swirls around Section 251 of the telecom act, which requires incumbent local exchange carriers (ILEC) to make elements of their networks available at cost to competitors. ILECs want the requirements to be lifted, while new entrants argue they need access to some of these ILEC facilities to compete.

As was evident in February, the ILECs won a few concessions in this order – they no longer have to offer access to new fiber loops or packet-switched facilities – but the FCC refused to remove the bulk of the sharing requirements.

In fact, the FCC added what many ILECs view as an onerous new twist: a role for the states to play in determining who has to share what and where. This is in answer to a Washington, D.C., circuit court ruling that criticized the FCC’s original nationwide policy and called for a “more nuanced” approach to competition.

Under the new rules, the commission will maintain a list of the major resources all ILECs have to make available to competitors while states will consider a subset of elements that are based on local market needs.

Although the FCC says the approach “offers the certainty and stability necessary to enable parties to make investment decisions,” it could create a patchwork quilt of regulations that stymies industry advances and leads to protracted legal action. Time will tell.

While the FCC ruling is well reasoned, it is trying to address a wicked problem where potential solutions can cause more trouble than they solve. The only way to deal with the problem might be to get out of the way and let the market decide.