Powell Favors Facilities-Based Competition
By TED HEARN -- Multichannel News, 10/28/2001 7:00:00 PM
Washington — In the next few years, the Federal Communications Commission plans to place greater emphasis on promoting multiple providers of high-speed data in an environment marked by minimal regulation.
Calling for a new regulatory approach, FCC chairman Michael Powell last Tuesday said the agency hoped to spur the deployment of broadband facilities nationally, a step that would likely involve overhauling rules adopted in implementing the Telecommunications Act of 1996 prior to his arrival at the agency in 1997.
Speaking to reporters at FCC headquarters, the Republican outlined a broad agenda and gave strong hints as to his preferences, but refrained from stating when the FCC would act. Powell also didn't promise specific outcomes in rulemakings already in progress or about to be launched.
But Powell's remarks contained clues that he prefers to allow cable operators to provide high-speed access without providing forced access to competitors, and to allow phone companies to challenge cable operators in that arena under the same regulatory regime.
"I think broadband should exist in a minimally regulated space," Powell said. "We should limit regulatory costs and regulatory uncertainty."
Powell suggested a role for regulation based on the presence of "demonstrable anti-competitive risks and discriminatory provisioning."
Apparently, Powell assumes a competitive broadband market would give network owners an incentive to reach out to unaffiliated content providers that offer popular applications, rather than limit consumer choice.
The FCC would move "expeditiously" on whether cable operators and phone companies have to provide competing Internet service providers with access to their advanced networks, Powell said.
OBJECT: COMPETITION
Powell also indicated that he wants to shift the FCC away from promoting phone-service resale and network-elements leasing toward a model that would require competitors to build their own facilities.
"Facilities-based competition is the ultimate objective," said Powell, who offered cable-provided local phone service as an example of a competitor relying on its own network.
Precursor Group analyst Scott Cleland said Powell's program would favor Baby Bells' campaign to obtain broadband deregulation, something cable already enjoys.
"Cable has the most benign regulatory environment in over a decade, and that doesn't look to change," Cleland said. "The Bells have the most nanoregulatory environment in their history, and it looks like the trend is toward less regulation."
Legg Mason telecom analyst Blair Levin said Powell's remarks confirmed his past support for competition over regulation. But he said Powell was less clear about what policies the agency would adopt as it moved in a new direction.
RESALE: A JUMP START
In implementing the 1996 law, the FCC adopted rules that would allow new entrants to enter the local phone market. They could build their own networks with the right to exchange traffic with incumbents, resell the incumbents' telecommunications services and lease network elements — such as the line that runs from the central office to the end user — to fill gaps in their nascent facilities.
Powell said he might have voted for such a scheme five years ago, but he now favors FCC policies that contain a "bias" toward facilities-based competition as a means of providing consumers with real choice in terms of pricing and services.
"It's time to reconsider the best approach to achieve meaningful competition," Powell said. "Commission policy should provide incentives for competitors to ultimately offer more of their own facilities."
BELL COMPLAINTS
Over the last five years, the Bells have complained that the FCC's pricing rules allowed competitors to resell phone service and use network elements they've leased at below-cost rates.
As a result, the Bells had no economic incentive to invest in new facilities they would be forced to give away, and their competitors had no incentive to build networks when they could provision customers more economically through the Bells' services and networks.
"Chairman Powell has outlined what we agree is the correct next step, the encouragement of more facilities-based competition," said BellSouth Corp. vice president of government relations Herschel Abbott in a statement. "There is no need for incumbents and their customers to continue to subsidize the competitors."
Congress embedded resale and network-element leasing in the law to help local phone competitors build a small beachhead and avoid having to make large capital expenditures to replicate the vast networks of incumbents, which had been protected from competition for decades and benefited from subsidies for just as long.
Resale and network element leasing still have a role, said Julian Epstein, former Democratic chief counsel for the House Judiciary Committee, who claimed the Bells themselves use resale to offer long distance outside their local phone territories.
"While we can all agree that the eventual construction of new facilities is essential to our long-term telecommunications policy, we can also agree that a bipartisan Congress was correct in saying that the resale policy is one of the key, indispensable steps in getting us there," Epstein said in a statement. "And it is Congress's province, not the FCC's, to change the policy."
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