News

FCC Rejects Bid by SBC For IP Dereg

5/08/2005 8:00 PM Eastern

Washington— SBC Communications Inc. suffered a setback last Thursday when the Federal Communications Commission rejected the Baby Bell’s request for deregulation of Internet-protocol platform services expected to ride over its $4 billion Project Lightspeed facilities.

As a result, SBC, Verizon Communications Inc. and other big phone companies now must await FCC action on a comprehensive rulemaking designed to established ground rules for providers of IP-enabled services, including cable companies.

That rulemaking, launched under former FCC chairman Michael Powell, is a priority for new head Kevin Martin. Policies decided in the rulemaking, still several months away, will likely be shaped by the Supreme Court ruling in June or July on whether the agency properly decided to keep deregulated cable’s high-speed data service.

It is also possible that Congress might take the issue away from the FCC by passing new legislation. But any effort to pass a law overhauling the Telecommunications Act of 1996 is expected to be contentious and time-consuming.

“The commission will act certainly much more quickly than Congress. I don’t expect Congress to do much until, like, 2007,” said George Reed-Dellinger, a telemedia analyst with Washington Analysis.

For years, SBC and Verizon have pressed the FCC to lift broadband regulations that apply to them but not cable, such as providing nondiscriminatory access to competing Internet-service providers like EarthLink Inc. and America Online. But the FCC’s ruling last week represented another failed attempt to achieve regulatory parity.

In a prepared statement, Martin said the agency denied SBC’s request “on procedural grounds.” Martin didn’t go out of his way to hand SBC a defeat; rather, the FCC was required to act last week by federal law or SBC’s request would have been automatically granted.

In an order adopted unanimously by the four FCC members, the agency concluded that SBC had sought regulatory forbearance from rules that “may or may not” apply to the telco’s IP-platform services. The agency said it is required to consider forbearance only with regard to rules that clearly apply and not to rules that have potential application. The FCC also said SBC’s request was “insufficiently specific.”

The FCC noted that in all of its history, it had never granted the relief SBC was seeking.

“SBC’s petition was the equivalent of a regulatory temper tantrum, and the FCC sent them to the corner for a time-out,” said Precursor CEO Scott Cleland, an analyst who follows the cable and phone industries.

Although SBC wanted to eliminate open access for ISPs with regard to Project Lightspeed, the company told the FCC it was not looking to do the same with regard to access to its legacy digital subscriber line platform.

In a prepared statement, SBC senior vice president James Smith didn’t use the commission’s decision to scorch Martin for failing to promote the rollout of new broadband facilities under light government oversight.

“While we had hoped that the FCC today would embrace the opportunity our petition offered to conclusively set a policy framework for the converging world of communications, we also remain optimistic that this [FCC], through the leadership of chairman Martin, is poised to take these issues head-on over the next several months,” Smith said.

SBC’s somewhat muted response was likely attributable to the fact the company’s merger with AT&T Corp. is pending before the FCC. Before it agreed to merge, AT&T opposed SBC’s forbearance petition.

An AT&T spokeswoman declined to comment on SBC’s defeat at the FCC.

An SBC spokesman could not confirm whether SBC would ask the FCC to reconsider its decision or take the agency to court.

President Bush has called for universal and affordable broadband access by 2007. In his statement, Martin reiterated that one of the FCC’s “core priorities” was “promoting the deployment of new packetized networks throughout the nation.”

He added that the FCC should “move forward” to create a level regulatory “playing field” among “similarly situated service providers” of advanced services.

More broadly, SBC has another petition pending asking the FCC to affirm that traditional cable regulation — franchising, franchise fees, must-carry and retransmission consent — do not apply to Project Lightspeed services. The FCC folded this request into the IP-enabled services rulemaking.

SBC insists that its provision of IP video is different from traditional cable service and thus cable rules should not apply. Passing 18 million homes in the first four years, Project Lightspeed would require thousands of franchises if SBC is forced to comply with cable rules.

Randall Stephenson, SBC’s chief operating officer, told a Morgan Stanley conference here last week that Project Lightspeed’s deployment scheduled would be severely hampered by the franchise requirement.

“If we have to get 2,000 franchise agreements, this will not get built in three years,” Stephenson said, according to the Financial Times. “We have to do something to make it go faster, or we will hit a brick wall.”

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