MOST COMMENTERS URGE FCC TO APPLY UNBUNDLING TO BELL DSL

“Given the myriad of diverse interests that exist within the broad telecommunications sector of the national economy, it is relatively rare that in a major rulemaking proceeding the overwhelming number of commenting parties representing those interests would agree that the Commission’s proposals being considered in the rulemaking are contrary to fact, law and the public interest,” Sprint said. But Bell commenters said they shouldn’t be singled out with separate regulations and challenged business acumen of some of their critics.

“Contrary to the apocalyptic proclamations of some commenters,” SBC said, rulemaking proposals “are neither extreme nor revolutionary.” Saying unbundling would continue on basic telecom infrastructure, company said rulemaking “does not alter the status quo for ISPs for dial-up narrowband services or deny ISPs access to wireline broadband consumers.” BellSouth focused on comments by Covad that FCC’s rulemaking was “solution in search of the wrong problem.” BellSouth said Covad’s take on real problem was to blame “every broadband ill on an alleged conspiracy to destroy the CLECs… Covad lists an alleged parade of horrors.” BellSouth urged FCC to “move beyond the rhetoric of Covad’s victim mentality and its cry for more regulation to ensure CLECs’ survival.” Company then quoted FCC Chmn. Powell as saying “the marketplace can be a killer… [It can] strangle bad business models… doing what regulators fear to do.” Covad, in its reply comments, said if FCC “did not already have serious second thoughts about this Notice, it should now. The Commission cannot blind itself to the panic and uncertainty that the nation’s telecommunications sector is suffering. That uncertainty is a direct and predictable result of the simple fact that the FCC has, in recent months, thrown open the entirety of its procompetitive, proconsumer implementation of the 1996 Act.”

SBC promised Bells would “continue to offer broadband facilities to many independent ISPs,” saying it recently had signed Memorandum of Understanding (MOU) with U.S. Internet Industry Assn. (USIIA), to which SBC belongs, which it called “an association of nearly 300 diverse Internet providers, including ISPs,” that called for SBC to “negotiate commercial agreements with ISPs for broadband Internet access in a deregulated environment.” While there are some ISPs on USIIA’s membership list, including Prodigy, most of its members are hardware and software companies. Other groups, such as American ISP Assn. and BroadNet (each of which has both independent ISPs and state ISP associations on its membership list), have questioned whether USIIA can be called representative of ISPs. One criticism of USIIA from ISP community is that it was only ISP-affiliated group to back HR-1542, Bell deregulation bill, by House Commerce Committee Chmn. Tauzin (R-La.) and ranking Democrat Dingell (Mich.). In its comments, USIIA filed MoU with Verizon (another USIIA member) that said both agreed that FCC must create uniform broadband rules and regulations with market-based commercial agreements replacing regulation on interconnection. MoU says Verizon “is willing to commit that, at a minimum, commercial agreements for broadband services used to provide Internet services will be available and negotiated between Verizon and ISPs based on volume, terms, points of connection and other established market forces.”

FCC Authority and Role Questioned

Some commenters questioned FCC’s authority to move Bell DSL service out of Title II telecom service requirements. Cal. ISP Assn. said “there is no other reason or lawful basis” for FCC to eliminate unbundling requirements for broadband, “and even if the Commission had such authority, it should not exercise that authority because of strong public interest considerations weighing against such action.” In separate filing, ISP associations of Ohio, Tex. and Wash. also challenged FCC’s legal authority to move Bell services out of Title II telecom regulation. Allegiance Telecom said Telecom Act’s promotion of competition through unbundling “is working.” “Congress is actively considering a number of measures that would better define the interplay between the national policies of promoting broadband and promoting competition,” company said: “The Commission should not attempt to do what Congress has so far declined to do, namely sacrifice competition in the blind hope that such a sacrifice will further promote broadband deployment.”

Coalition of consumer advocates from Cal., Conn., Md., Me., N.H., Ohio and Pa. said “much of wireline broadband Internet access service remains a telecommunications service” and reclassifying it could slow broadband deployment. They accused Bell companies of seeking to create not level playing field but “tilted field that subsidizes their offerings” of broadband, but they also backed all broadband providers contributing to universal service, which some commenters said would be another way to fund ILECs. But Bells insisted FCC not only had authority to act, it also was obligated to out of fairness. “No one seriously disputes that bundled broadband Internet access is an information service,” Verizon said: “And if Internet access is an information service, then it cannot be a telecommunications service, because these two categories of service are mutually exclusive.” “It would be both arbitrary and unlawful for the Commission to resolve the same legal issue differently for wireline and cable providers,” SBC said. In separate proceeding, the FCC is considering classifying cable broadband services as information service. USTA said those seeking to preserve unbundling for DSL broadband were “backward looking,” seeking “to retain regulations on ILECs that are from a different era.”

Transmission services “are quintessential common carrier services,” said WorldCom, CompTel and the Assn. of Local Telecom Services (ALTS) in joint statement. They said all commenters except ILECs agreed that stand-alone DSL was telecom service when offered for fee. “As the ILECs are frank to acknowledge, they are asking for a radical change in the rules, without offering any justification that would support such a change.” Groups also said that giving ILECs deregulation they sought could allow ILECs to offer other voice and data services at “broadband speeds” and evade regulation for services currently regulated. Time Warner Telecom said removing ILECs from Title II obligations would “embroil the Commission needlessly in extremely complex and onerous accounting issues, jeopardize deployment of broadband in rural and high-cost areas and preclude the Commission from enforcing such bedrock statutory requirements as CALEA and customer privacy protections.” General Communications said DSL had technological limits on its distribution and was only one mode of broadband transport, and that to eliminate existing rules “based on intermodal competition in only one product market in some geographic areas” would be “arbitrary and capricious.” Bell approach would “undercut the reasonable reliance interests of all other participants in broadband services, including ISPs and consumers,” Earthlink said.

Reclassifying broadband Internet access as information service with no telecom service component “is to wield a deregulatory meat axe, where a public policy scalpel is needed,” National Rural Telecom Assn. said, urging FCC to recognize that Internet access involve both services for all providers. Alliance of Local Organizations Against Preemption (ALOAP) said FCC should assume that “one can never be both a provider and a user of telecommunications service,” so there’s no reason to have mutually exclusive definition of telecom or information service. Meanwhile, National Assn. of Bcstrs. (NAB) said no commenter had offered reason to depart from current regulations, so regulatory obligations in narrowband should apply in broadband: “NAB urges the Commission to prevent the owners of bottleneck facilities -- whether ILECs or cable operators -- from exercising their control of the essential pathway into consumers’ homes so as to silence the voice of competing speakers in the broadband marketplace.”

Preemption and Rural Issues Debated

Many states filed reply comments and all backed unbundling for wireline broadband facilities. But many feared preemption. FCC “should preempt state attempts to regulate broadband,” Verizon reiterated in its reply comments, adding that preemption “should apply not only to direct regulation but also to indirect regulation, as when a state imputes revenues from broadband to other regulated services.” “Preemption is not proper under applicable law” and “cannot be sustained,” responded state of Cal. “As voice migrates to broadband technology using wireline facilities, there is no question that much of this traffic will be interstate and local.” N.Y. Attorney Gen. Eliot Spitzer said rulemaking could have “a deleterious effect on the enforcement of consumer protection laws by the Commission and state agencies,” including protection of ability of disabled to access telecom. State of Tex. said “we strongly disagree” with Verizon’s position “that the Commission should preempt the state role in broadband regulation.”

Many commenters backed having facilities-based broadband providers contribute to universal service fund, which funds rural telephony and schools and libraries. Those backing change included Organization for the Promotion & Advancement of Small Telecom Companies (OPASTCO) and American Library Assn. Latter asked FCC to ensure that “changes in technology do not defeat the purpose of the E-rate.” Verizon said FCC should require “all providers of broadband transmission contribute to the schools and libraries portion of the universal service fund -- but only to that portion of the fund, which is the only segment used to subsidize broadband deployment.” But Charter Communications was opposed, saying that ILECs drew more than 95% of the support from it: “ILECs have essentially proposed that the Commission create a ’transfer payment’ from cable operators to the ILECs to fund the deployment of the ILECs’ networks.” Company faulted Verizon in particular for its “double contribution” proposal of subsidizing schools and libraries, when cable already “contributes millions annually” through Cable in the Classroom program.

NCTA said that several commenters expressed concern about imposing universal service contribution in that it could affect nascent services, point NCTA had made in initial round. One of those services is voice-over-IP (VoIP), of which NCTA said “a contribution requirement is inappropriate given the nascency of the service.” Genuity Solutions said some commenters such as Cal. ISP Assn. said that without VoIP regulation, there would be rapid movement from circuit- switched voice to VoIP, thus preventing consistency in voice deregulation. “The Commission has always treated VoIP as a nonregulated information service,” Genuity said, and there’s no reason that “a decision merely to continue the present classification of VoIP as an information service will cause the rapid demise of circuit-switched voice telephone services.”

OPASTCO said comments supported need for rural ILECs to continue to be free to pool resources for DSL build-outs. Group of 6 rural Kan. and Okla. ILECs said if FCC did classify wireless broadband as information service, it shouldn’t deregulate facilities of small rate-of-return LECs that served rural areas: “Rate-of-return LECs serve significantly different markets than do price-cap LECs” and require pooling to build out broadband.