Analysts Say Questions Remain about Long Term Effect of Verizon Forbearance Petition
The FCC decision not to act on a Verizon forbearance petition seeking regulatory relief regarding charges to business customers for high-speed data was a win for Verizon -- but how big remains unclear, analysts said Tues. The exact relief provided by the FCC is uncertain because the Commission has released statements and a news release, but no order yet, analysts said.
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Over the objection of Commission Democrats, the Commission let pass a Sun. deadline to act on a petition of forbearance by Verizon (CD March 21 p1). An FCC source clarified Tues. that Chmn. Martin circulated an order for a vote, but it failed 2-2. The Commission’s news release cited Sec. 10(c) of the Communications Act, which provides that a forbearance petition “shall be deemed granted if the Commission does not deny the petition… within one year.”
“The FCC action (or lack thereof) gives Verizon new freedom from traditional common-carrier regulation in the enterprise market (serving big-businesses), which we believe gives the Bell new leverage with competitors and customers,” Stifel, Nicolaus said Tues. in a research report. “Because there is no FCC decision describing the scope of the relief and questions remain about what will be considered to have been in the petition, there is uncertainty about the precise impact.”
The analyst firm noted that Martin and Comr. Tate in a joint statement said Verizon had “amended its petition to narrow the scope of its requests.” But, the firm said, “the agency’s 2 Democrats expressed concern that the Bell was gaining sweeping deregulation -- and by default, not express agency action.”
Atlantic Equities predicted that the decision will prove contentious. “Currently it is unclear what the parameters of the decision are and whether it applies to all carriers or just Verizon, since there is no rule-making that specifies what the FCC’s requirements actually are,” the firm said.
UBS said in a research note Tues. that by its calculation, special access is roughly a $14 billion total annual business for the Bells, with Verizon and AT&T each accounting for $5 billion. BellSouth and Qwest account for $2 billion each. “Yesterday’s ruling now largely lifts the unbundling requirement for loops that serve large enterprises,” UBS said. “While the ruling is in response to Verizon’s petition, we believe there are implications for the other Bells as well… [Special access] involves dedicated access between two or more points such as customer buildings, network interconnection points, or cell towers. This is a high margin revenue stream for the Bells due to the low customer acquisition and service cost, churn and bad debt associated with the service.”
Martin and Tate provided some guidance late Mon., saying in a statement: “The narrowed petition, and the corresponding relief afforded to Verizon, is consistent with and similar to the relief provided in recent Commission decisions regarding broadband services, packet switching, and fiber facilities.” They said in a footnote: “It arguably would have been preferable to have reached consensus on a proposal clearly setting forth the relief granted today.” The Martin-Tate statement also clarified that broadband Internet access services are subject to CALEA, and that Verizon had “narrowed its petition” to exclude federal universal service obligations. Sources said the chairman had directed the staff to prepare a separate order that’s being considered specifically to deny USF relief as a result of the forbearance petition.
NTCA said it met with Martin last week to urge him to act on the petition and not allow the deadline to pass. The group saw potential negative implications for rural carriers.
“We are disappointed that the forbearance petition went into effect,” said CEO Michael Brunner. “This type of petition may harm some small rural communications providers, and rural consumers could find themselves paying premiums for access to the Internet. Such a result would be contrary to the Communication Act’s goals of promoting the deployment of advanced services, developing competition and maintaining affordable rates for all Americans.”
Jeff Chester of the Center for Digital Democracy called on Martin to resign. “Instead of protecting Internet users, consumers and citizens, Chmn. Martin has further eroded the public interest potential of digital communications,” Chester said. “It’s clear he is more loyal to the interests of broadband monopolists than the public at large.”
Verizon said: “The impact of this petition… is that outdated regulation on broadband services is lifted, allowing greater flexibility in offering sophisticated high-capacity services in the highly competitive enterprise market.”