FCC Gives Qwest ‘Me-Too’ Forbearance on Enterprise Broadband

The order largely tracks one last year partly granting an AT&T me-too petition (CD Oct 15 p5). In both cases, the FCC stopped short of giving me-too carriers all the relief Verizon got. The FCC gave Qwest forbearance from application of dominant carrier tariff filing, cost support, discontinuance and domestic transfer of control rules, and certain Computer Inquiry requirements. Forbearance applies to Qwest’s existing packet-switched services with 200 kbps or more bandwidth in each direction, and optical transmission services such as fiber, ATM and VPN. Relief is limited to existing offerings, and doesn’t apply to Qwest TDM-based DS1 and DS3 services. The FCC conditioned relief on continued compliance with Computer Inquiry obligations applying to all non-ILEC, facilities-based wireline carriers.

Dissenting Commissioners Michael Copps and Jonathan Adelstein condemned the order in a joint statement. The order “reaffirms the notion of a special class of ‘broadband enterprise services’ deserving of forbearance,” they said: “Clearly, we should not be granting forbearance for rules covering special access services without first completing an industry-wide analysis of competition for those services. The order also lacks any rigorous analysis of the impact on small and medium size business customers as well communications providers who use these services to provide both residential and enterprise services.”

FCC Chairman Kevin Martin said “this relief will enable Qwest to have the flexibility to further deploy its broadband services and fiber facilities without overly burdensome regulations.” Commissioner Robert McDowell also praised the order, but noted that the FCC still needs more information on special access competition. “I will continue to work to ensure that these questions are fully explored in the special access proceeding after a more granular record has been established through detailed mapping of business broadband facilities,” he said. Commissioner Deborah Tate didn’t release a statement.

“The marketplace for communications services has become very competitive, and it continues to grow as new providers and technologies are introduced,” said Shirley Bloomfield, Qwest federal relations senior vice president. “This order will now allow Qwest to provide customized pricing and offerings.”

Rivals of Qwest slammed the order. “We are disappointed that the FCC has again decided that an ILEC’s broadband services are subject to competition and should be deregulated without conducting an appropriate product market or geographic market analysis,” said a CompTel spokeswoman. “Reasonably priced ethernet and other broadband services enable American businesses to become more efficient and ultimately more competitive in today’s global economy, and there simply is not enough competition for these enterprise broadband services to keep prices affordable for most businesses,” said Kelsi Reeves, TW Telecom federal government relations vice president. “This FCC decision is not in the best interest of America’s businesses and will have the effect of severely limiting the benefits and innovation that this economy needs now more than ever.” Sprint Nextel is “disappointed that the commission has chosen yet again to deregulate a dominant carrier’s special access services despite a clear record that these very same carriers are abusing their dominant carrier status by charging exorbitant prices for these services and imposing onerous and exclusionary terms and conditions in their contracts,” a spokesman said.

Adopting the order July 22, the FCC beat the 12-month forbearance deadline by nearly two months, but still was well behind a due date it set for itself last October. In the Oct. 11 AT&T ruling, the FCC said it would issue an order in 30 days to achieve regulatory parity on the subject among all three Bells. To do so, the FCC would have needed to approve an order trimming relief Verizon got in its deemed-granted petition. Breaking the Qwest petition off from the more controversial Verizon action likely simplified the issue significantly for the FCC, speeding resolution, Stifel Nicolaus analyst David Kaut said in an interview.

The FCC could have acted sooner, as the Qwest order clones the AT&T ruling, said Randolph May, president of the Free State Foundation, a think tank focused on deregulation and free-market policies. The FCC long ago should have “more robustly” used its forbearance authority to end regulation of all broadband services, he said. “Based on the agency’s usual practice, in some sense it may be surprising whenever the commission beats a one-year statutory deadline, even by a month,” he said. “But the pity is that the decision took so long to get out.”

The Qwest order shows the forbearance process is broken, Copps and Adelstein said. “The commission is bent on continuing its headlong rush to eliminate large swaths of its rules under the guise of forbearance and absent the kind of industry-wide reviews that would enable us to assess the marketplace as a whole,” they said. “We believe this is an egregious mistake. The lack of data concerning the specific product and geographic markets at issue and this order’s lack of analysis cause us great concern about both the substance and the process by which the Commission grants forbearance from our rules. Moreover, as a result of this approach, the commission finds itself inundated with company-specific requests for ‘me-too’ relief that divert attention from the many other critical priorities before us.”

The forbearance order doesn’t affect Qwest’s 2008 guidance, given Wednesday in the carrier’s Q2 earnings call (see separate report in this issue), a Qwest spokesman said.