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COMMISSIONERS SEE LIMITED FCC ROLE IN BROADBAND BUILDOUT

Three FCC commissioners agreed Fri. that Commission probably should take some action to encourage deployment of broadband services. Addressing broadband summit sponsored by NARUC and National Exchange Carrier Assn. (NECA), Comrs. Copps, Abernathy and Martin all said FCC had role in eliminating regulations that acted as disincentives to broadband build-out. Beyond that, Copps, lone Democrat, seemed to take more proactive role as he questioned what was so wrong about govt. involvement in such major business development. Martin, on other hand, pushed elimination of sharing rules that he said discouraged carriers from expanding their own facilities. Abernathy saw possible role in encouraging timely rural deployment. Commissioners were among numerous industry and govt. representatives, including Bruce Mehlman, asst. Commerce secy. for technology policy, who offered views about state of broadband and wisdom of govt. involvement in stimulating its rollout. Mehlman outlined for National Summit on Broadband Deployment “critical questions” that faced Administration in that area as well as regulatory issues confronting network build-outs at state and local levels.

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Copps questioned whether govt. involvement in broadband rollout was such “Halloween horror,” saying that govt. had been involved in nearly every other major business breakthrough in U.S., from development of intercontinental railroad to interstate highway system: “If rolling out the infrastructure of the Information Age is a central driver toward America’s future, is there something to be said for having a serious national discussion about the proper involvement of government in the enterprise?” He said he didn’t disagree that business should lead way, but said there should be partnership with govt. “Our role is to eliminate barriers to competition,” he said. “I'm merely saying we need to ask basic questions. We need to place ideologies aside and look at basic facts.” He said his answer to questions about FCC involvement might be different from those posed by Chmn. Powell Thurs. (CD Oct 26 p1). Big question is “whether market can get the job of deployment done” throughout country without intervention, he said. It may be too early to tell, but it’s probably issue that could benefit from “a serious national debate.”

Comr. Abernathy said one area that might bear investigation was whether govt. could do anything to encourage more timely broadband build-out in rural areas where costs were high and Internet nodes were few. She said actions under consideration in Congress, such as tax incentives, could be useful in encouraging rural deployment. She said her philosophy was that “ultimately it’s up to the markets,” but FCC ought to make sure it wasn’t “standing in the way.” One way agency could help would be to assure there was adequate spectrum for satellite and wireless services aimed at providing broadband to rural areas, she said.

Martin said govt. should look at “way it taxes and regulates” broadband and suggested changes in depreciation policy might help. But he said he shared Powell’s skepticism about “using tools that could be seen as industrial policy.” He added: “Many have said that we need to be cautious so that we, as regulators, do not stymie the deployment of broadband services. But I do fear that, in many unintended ways, we already have.” Like Powell, he urged “renewed focus on facilities-based competition” and suggested FCC ought to look at how sharing rules might act as disincentive to new facilities build-outs. Importance of carriers’ having own facilities was “shown to us on Sept. 11,” he said. He said performance measures were important, as well as colocation rules for facilities-based CLECs, but FCC should consider whether to reduce number of unbundled network elements that facilities carriers must offer to competitors. In addition, local regulators ought to consider effect on broadband build- out of their rights-of-way, zoning and franchise policies, he said.

Mehlman echoed similar message of govt. regulatory restraint delivered day earlier by Powell and NTIA Dir. Nancy Victory. One key question is whether pace of deployment is adequate or whether there is problem with market, he said, theme echoed by many participants over 2 days on where roots of deployment issues lay. He cited recent Morgan Stanley research that indicated take rate for broadband among U.S. consumers was close to 10%, figure that also came up at NTIA forum earlier this month on Internet policy questions. “The failure could be one of marketing and not the market,” he said. “If that is the case, the Administration would have a role that is very different than if” it was factor of some regulatory dynamic, he said.

Mehlman, in morning keynote speech at Arlington, Va., conference, also cited role that local and state govts. played when it came to competing policy concerns that “may hinder broadband deployment.” Permits used to account for about 10% of network costs and now that figure is closer to 20%, he said. “Carriers have found it difficult to access rights-of-way,” said Mehlman, who was lobbyist for Cisco before assuming post at Commerce. Broadband deployment comes into contact with host of permit and licensing regulations, including those in environmental enforcement and historic preservation, and “broadband often loses,” he said. Building codes and permits also provide another layer of issues for network builders, he said. Mehlman cited example of Williams Communications, which he said employed 400 agents in field as it built out its 33,000-mile fiber network to apply for 10,000 different licenses and permits from various govt. agencies. “Governments understandably need to consider issues beyond bandwidth,” he said of such policies. Citing Progress & Freedom Foundation statistic that there were 37 different types of state and local telecom taxes, he said decision that faced policymakers was whether such restrictions “can price Americans out of broadband.”

Aside from such pending policy questions, Mehlman also cited 2 tracks that he saw Commerce Dept. taking: (1) “We need to work closely with the Federal Communications Commission to consider our regulatory and competition policies.” Agencies “need to make sure we minimize the uncertainty and cost of regulation” and “get to the bottom of facts about supply and demand better.” (2) NTIA and FCC are undertaking a careful examination of spectrum policy.

Also at conference, panel of more than dozen industry, consumer and govt. officials argued about what was needed for broadband service to take off -- whether it was more facilities, more applications or lower prices -- and came to no firm conclusion. Several panelists concluded only that this was “chicken-and-egg” situation. Question was raised in context of where regulators might want to intervene. Verizon Senior Vp Thomas Tauke said it was hard to build out facilities when there wasn’t enough content to attract customers. Intel Communications Policy Dir. Peter Pitsch said development of higher speed broadband services would stimulate more applications and thus more consumer interest. “We think more exciting things will happen at higher speeds,” he said. For rural telcos, issue is price, said Earl Owens, pres. of National Telecom Co-op. Assn. Rural telcos charge $35.95 per month for DSL under NECA tariffs, he said, but then have to add Internet access costs of more than $25 per month because of distances involved.

Ia. Utilities Board Comr. Diane Munns questioned whether regulators should stimulate development of applications when most applications tended to be entertainment-based rather than “vital services.” Randy May of Progress & Freedom Foundation argued for stimulation of facilities build-outs by removing sharing requirements on Bell facilities. Rick Cimerman, NCTA senior dir. for telecom policy, said it was “refreshing” that both Powell and Mehlman emphasized in speeches at 2-day NECA-NARUC conference that govt. response should be driven by availability of broadband services, not by consumer adoption rates.