States Say AT&T Forbearance Would ‘Dump’ Separations Procedures, Remove Safeguards

Three commissioners -- Kevin Martin, Deborah Tate and Michael Copps -- are the Joint Board’s federal members. The states’ views won’t necessarily sway their federal colleagues. However, Tate used to be a state commissioner and has historically paid close attention to state views.

Forbearance is “simply not the proper vehicle to address many of these issues,” the Joint Board state members said. The Joint Board is considering “the same separations reform issues” raised in AT&T’s petition, and the FCC should defer to the Joint Board to develop new policies, state members said. Under separations rules, about 75 percent of carrier costs are allocated to intrastate and 25 percent to interstate. To change the separations rules, the FCC must defer to the Joint Board. A freeze on the separations percentages is in place until mid-2009, but the Joint Board “should issue a recommended decision well before the expiration date,” the state members said: “Even if the current petition is denied, AT&T would not be without relief for long.”

AT&T argued in its forbearance petition that cost- assignment rules are “vestiges from decade-old rate-of-return regulation,” which based rates on carriers’ costs. Now, AT&T is instead subject to pure price cap regulation that sets price ceilings without regard to costs, rendering the accounting rules useless, it said. The state members acknowledged the reduced use of separations results: “Perhaps cost allocation rules should be dramatically changed and simplified,” they said. “However, wholesale abandonment of existing rules via forbearance is not justified.” Many of the cost-assignment rules AT&T seeks to kill “provide critical data needed to justify state and federal decisions to deregulate or revise oversight of carrier activity,” they said.

AT&T isn’t “questioning the desire of the Joint Board to address an issue they admit needs to be changed,” an AT&T spokesman said. But “it should be noted that the board has been looking at this issue since 2001.” Approving AT&T’s petition “would not diminish the work being performed by the Joint Board because separations reform may still apply to and be welcomed by carriers that are still governed by rate-of-return.”

The Ohio PUC joined state lobbyists’ April push against AT&T forbearance. Granting forbearance would remove “safeguards implemented less than a year ago,” when the FCC let Bells combine local and long distance divisions, the PUC said in a Wednesday letter to commissioners. In that August order, the FCC said Bells should remain subject to “the Commission’s accounting and cost allocation rules and related reporting requirements.”

Meanwhile, lobbyists continued their eighth floor rounds. After paying five visits to commissioner offices in three days, AT&T recorded two more Monday, meeting with Commissioners Robert McDowell and Jonathan Adelstein. An opposition group composed of CompTel, NuVox, Covad, T-Mobile, Sprint Nextel, XO Communications and the Ad Hoc Telecommunications Users Committee met with Copps last week and is meeting with other commissioners this week.

Commissioners aren’t decided on AT&T forbearance, and their focus this week is on the Stanford University hearing on network management and the 700 MHz auction, an FCC source said. The FCC has circulated two orders, one approving and one denying the AT&T petition. Commissioners must vote by the April 24 statutory deadline.