Telecom Rewrite Uncertain with Courts and Congress’s Competence

Precursor CEO Scott Cleland predicted a 20% chance of a 2005 rewrite, and Bob Blau, BellSouth Vp-federal regulatory affairs, predicted more than a 20% chance. Grant Seiffert, TIA Vp-external affairs, was the most confident, saying there was a 50% chance. Seiffert added that Senate Commerce Chmn. Stevens (R-Alaska) would put his considerable weight behind a rewrite around summer or autumn. But some disagreed that a rewrite would help. “It doesn’t need to get rewritten -- it needs to get scrapped,” said Blau. He said a new telecom bill should be “closer to 10 pages,” not in the hundreds. OPASTCO legislative dir. Randy Tyree said “modernization” of the 1996 law was preferable. “There’s a lot of education that’s going to have to be done” the next 2 years because many members of Congress aren’t technologically savvy, said Lee Carosi-Dunn, counsel to Sen. McCain (R-Ariz.).

The basic divide on telecom legislation is urban- rural, panelists said. Blau said 40% of the Senate represents about 10% of the population, and rural senators of both parties will fight hard to extend broadband services to their areas through USF. The USF system is “not necessarily broken” but could use changes, Tyree said. He wants more affordable broadband rates from incumbents, triple-play service and more spectrum for rural customers.

The Supreme Court’s ruling in the Brand X case, to be argued, settling whether broadband is a telecom or information service, will be decisive, panelists said. Seiffert said a telecom finding, and its regulatory implications, “would be a disaster” for the broadband industry. Caruso-Dunn and Blau said the court would probably overturn the 9th U.S. Appeals Court, San Francisco, decision cable modems weren’t an information service as the FCC had decided. Congress would in turn feel additional pressure to settle broadband’s regulatory status, they said.

The FCC’s decision against Madison River Communications for allegedly blocking Vonage’s access to its network, known as “bit-blocking,” was unpopular with most panelists. Blau called it an “understandable but unfortunate” decision, saying VoIP providers would have no incentive to negotiate ICC rates with traditional phone companies if they can “piggyback” free with the FCC’s blessing. Tyree said phone companies should be compensated -- under telecom rules -- for VoIP calls on their local loop. The explosion in data traffic has “created a monster where the whole system is free-riding,” Cleland said. Large amounts of unidentified traffic already flow over his members’ networks, precluding them from negotiating ICC rates, Seiffert said, and the FCC’s decision will exacerbate the trend.

In response to Cleland’s question about Google, Yahoo and MSN paying transit fees for every user search or instant message, Tyree said “no” for searches but “maybe” for instant messaging. That prompted Blau to say these decisions “need to be worked out commercially, wholly outside the regulatory process” if consumers want innovation to continue delivering “more whiz-bang things.” He said carriers were doing fine deciding ICC rates through peering -- big providers trading roughly equal traffic with no need for payment -- and transiting agreements, small providers paying for the access from larger companies: “In a free market environment that works very efficiently.” He marveled at recently getting a 15 Mbps FTTH connection from Verizon for $45 per month, saying it’s evidence deregulation was working.