Sources: Martin Opposes SBC’s IP Request

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Federal Communications Commission chairman Kevin Martin made one of his biggest decisions since taking command in March, and it’s not good news for SBC Communications Inc.

In an order now in the hands of his fellow commissioners, Martin is calling for rejection, on procedural grounds, of SBC’s request for deregulation of Internet-protocol-platform services built upon the company’s $4 billion fiber upgrade, which is designed to reach 18 million homes by 2007.

FCC and industry sources confirmed Martin’s decision. A Martin spokesman declined to comment.

Specifically, SBC filed a petition asking that the FCC forbear from applying common-carrier regulation to IP-platform services. Because the agency has already deregulated many aspects of the Baby Bells’ broadband activities, SBC was mainly looking for an exemption from the so-called Computer II rules, which require the company to provide nondiscriminatory access to competing Internet-service providers such as EarthLink Inc. and America Online Inc.

Martin’s move to act on the SBC petition now was the product of a 15-month statutory deadline facing the agency. If the FCC failed to reject SBC’s petition by May 5, it would take immediate effect.

The commission currently has four members, two Republicans and two Democrats. If Martin fails to round up three votes, a 2-2 tie would mean that SBC’s petition would take effect by operation of law. Sources said Martin did not want see the FCC let a forbearance petition take effect by default.

“Our petition is about promoting investment in fiber networks deeper into neighborhoods to provide consumers with innovative Internet-based services. We are optimistic that the commission recognizes these benefits,” SBC spokesman Michael Balmoris said Friday.

In a client note Thursday, Precursor media and telecommunications analyst Scott Cleland predicted that SBC would withdraw its petition or that the FCC would reject it. He added that the agency would address SBC’s IP issues later in a much broader rulemaking on the regulatory classification of IP-enabled services.

Sources were less clear about the procedural defect in the SBC petition that prompted Martin to recommend rejection. One source said the agency would not grant the petition because SBC had asked for forbearance from rules that the commission had yet to say apply to Project Lightspeed -- in other words, SBC can’t seek an exemption from rules that don’t exist.

If that’s how the order is actually worded, rejection by the FCC might not be a defeat for SBC after all, because the company might be able to tell ISPs seeking access that they have no rights under current FCC rules.

In its petition, SBC said it was not looking for deregulation of its legacy network services, meaning that ISPs would continue to have access to its digital-subscriber-line platform.

“ISP-access rights to today’s common-carrier DSL-transport service would be untouched by an [FCC] declaration that IP-platform services are unregulated,” SBC told the FCC. SBC also said the agency would retain legal authority to fashion appropriate regulations for IP-platform services.

The timing of SBC’s petition likely raised other problems for the FCC. The Supreme Court is expected in a few months to announce whether the agency correctly determined that cable-modem service is purely an information service with no common-carrier access requirements.

AT&T Corp. -- which SBC is hoping to acquire for $16 billion -- was one of the strongest opponents of SBC’s forbearance petition. AT&T told the FCC that SBC failed to “remotely satisfy its burden” of showing that its request would promote competition and serve the public interest.