D.C. Circuit Dissects FCC Forbearance Orders on Special Access Market
The FCC took flak on Friday from federal court judges about two orders granting incumbent phone companies forbearance from dominant carrier requirements applying to the special access market. The exchange took place during oral argument at the U.S. Appeals Court for the District of Columbia Circuit. The case concerns FCC decisions in 2007 to grant petitions by AT&T, Embarq and Frontier, which were submitted as “me too” requests following a deemed-granted ruling for Verizon. In oral argument, Judges David Sentelle, Brett Kavanaugh and Harry Edwards had far more questions for the FCC than for petitioners representing business end users and competitive carriers.
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Judges queried the FCC’s logic in assessing special market competition using nationwide long-distance data, rather than more localized data. Special access is a local service, noted Sentelle. FCC lawyer Richard Welch said national data is appropriate because special access connects businesses to a national network. Edwards dismissed the argument, drawing an analogy to airport bus service: Airports may connect people to other cities, but that doesn’t make nationwide data the appropriate measure for bus competition at one airport.
The commission has precedent on its side, Welch argued. In EarthLink v. FCC, the D.C. Circuit upheld the agency’s use of a nationwide market analysis for broadband services, he said. Kavanaugh asked about the applicability of the case, citing petitioners’ argument that the court only upheld the FCC’s use of the test for residential competition. Welch said the court had upheld the test for unbundling requirements that applied to business and residential services. Unbundling requirements are different from dominant carrier requirements, replied Colleen Boothby, attorney for the petitioner, the AdHoc Telecommunications Users Committee. Petitions on dominant carrier rules are about market power, not facilities competition, and thus require closer analysis, she said.
The forbearance orders were consistent with Congress’s broadband deployment goals in Section 706 of the Communications Act, the FCC said. The dominant carrier rules discouraged incumbent carriers from investing in new broadband services, concurred John Nuechterlein, attorney for intervener AT&T. But Edwards appeared unswayed, joking at one point that the FCC appeared to hope “say[ing] broadband enough” would make the appeal “go away.”
The “harder issue” for petitioners may be the existence of alternative special access technologies, said Kavanaugh. Although the FCC deregulated provision of optical services, it kept dominant carrier regulations for DS1 and DS3, two time-division multiplexing network technologies. The forbearance orders reasoned that granting forbearance wouldn’t harm competitors because they would still have access to the TDM-based special access circuits.
TDM may be available, but it’s far inferior to the optical services deregulated by the FCC orders, said Boothby, representing large businesses that buy special access service. She said picking TDM over optical was like choosing to “string a bunch of VW Bugs together” to haul heavy cargo. Using “legacy” TDM services is “technically feasible,” but not “economically feasible,” agreed Christopher Wright, attorney for Sprint Nextel. Incumbents would never use TDM, so it’s “unreasonable discrimination” to force it upon competitors, he said.
The FCC improperly relied on a TW Telecom news statement in which the competitive phone company was upbeat on using TDM, Wright said. He called the statement “puffery” and not indicative of reality. Welch defended the FCC’s use of the statement, asserting that no company has incentive to lie to customers about service quality. TW must have found success with TDM, because while the FCC mulled forbearance, the company’s market share was increasing, Nuechterlein said.