FCC Net Neutrality Rules Having Zero Effect on Competition, McCormick Says

McCormick said emphatically he doesn’t expect net neutrality to emerge again as a “front-burner issue” for the FCC regardless of what the U.S. Court of Appeals for the D.C. Circuit decides on the pending Verizon appeal of the rules. “I think it’s one of those issues that’s been resolved for a long time,” he said. “I frankly think that it was resolved long before the adoption of the current regulation. Because it was over 10 years ago that the commission promulgated its Internet principles and for over a decade now companies have been operating in complete conformance with those principles, things like ‘do not block, impair, degrade.'” The Internet principles were adopted under former Chairman Michael Powell.

Verizon challenged the rules because of concerns they could “potentially limit companies from offering to consumers in the future services that consumers may well want to have,” McCormick said. “It was that ambiguity and that uncertainty that I think led Verizon to say, ‘This could be problematic, not just for us, but for public policy.'”

Wireline remains relevant even as wireless grabs most of the headlines and the attention of regulators, McCormick said. “The wireline world is really the central circulatory system of our economy,” he said. “It is the veins and the arteries that really connect what is now the information economy in the United States. We're seeing data traffic on our wireline networks increase at the rate of 40 percent per year and it’s wireline networks that connect all forms of communication, whether they originate in a wireline environment or a wireless environment."

McCormick said he welcomes the FCC’s focus on the IP transition under Chairman Tom Wheeler (CD Nov 20 p1). He noted that every day carriers are putting IP technology in their networks and equipment makers are offering more IP equipment and less analog equipment. Proposed transition trials will be “informative to everyone,” he said.

"I think that it’s extremely important that we have a managed transition to IP,” McCormick said. “The commission and the Department of Commerce worked very well together in transitioning us from a analog world to a digital world when it came to broadcasting. … You will recall that folks were very worried about having to get rid of their analog television sets and that was managed in a way that was done with nary a hiccup. The broadband transition from the analog world to the IP world also takes planning.”

The FCC could help carriers by eliminating regulations “from the monopoly era” that no longer serve a clear purpose, McCormick said. “We have to keep a uniform system of accounts separate and apart from GAAP [generally accepted accounting principles] accounting,” he said. “We're the only provider of voice telephone service that has to keep a uniform system of accounts that’s a separate backup, a separate form of books, from GAAP accounting.” Five years ago the FCC told companies the agency no longer wanted to look at those records, he said. “We said, ‘Well, we'd no longer like to keep the accounts.’ [The FCC] said ‘Well, we're not ready to allow you to do that yet.'”

USTelecom hopes the FCC under Wheeler will eliminate requirements that apply only to traditional phone companies, but not to competitors, McCormick said. He cited among other examples a mandate that regulated carriers have to make a voice-capable circuit available even when they deploy fiber. “In many cases it’s led our companies to have to maintain two networks, a fiber network and a copper network,” he said. “The copper network is quickly becoming one that the people don’t use.” Only 1 percent of U.S. communications consists of traditional voice traffic over copper lines, he said. The FCC can either repeal rules that no longer make sense or agree to refrain from enforcing them, he said. As a former cable and wireless association executive, Wheeler “has a very keen appreciation for those things that limit investment,” McCormick said. “There’s nothing that limits investment more than lack of certainty and predictability.”

McCormick also said the FCC needs to change how it views the USF as the agency changes that program fundamentally to refocus on broadband. McCormick was asked what advice he would give to Wheeler. “My advice to him would be: ‘Focus [USF] on broadband investment and look at the objective just as you are doing more nationally,'” he said. “The USF program is one that for rate-of-return carriers continues to be primarily based upon calculating subsidies that are based upon the provision of voice telephone service. It needs to be a program that’s based upon the costs of deploying and operating broadband infrastructure.”