Course unclear

SBC had asked the commission to rule it "non-dominant" in the provision of advanced services. The FCC fuled that a wholly-owned but separate subsidiary of SBC providing advanced services could be ruled "non-dominant" but the FCC refused to make a decision about the status of SBC itself. In a curious twist, the measure that passed succeeded only because commission inaction would have had the same effect as granting all of SBC's requests. Commissioners Copps and Adelstein complained:

"We concur, with both reluctance and disappointment, in this Order to forbear from requiring SBC's separate affiliate to file tariffs or cost support for its provision of certain broadband services. We support this Order, not because it is the optimal outcome, or even a good one, but because it is significantly superior to the option presented to us of no decision from the Commission and the resultant forbearance from such Commission inaction. A failure to reach agreement would have resulted, under the Communications Act, in an automatic grant of SBC's entire request for forbearance, a result that we find incomprehensible in light of the record before us."

Martin wrote a dissenting statement, in which he said that he did not believe that the FCC's order would stand up in court, and that he would like the FCC to address the question of whether or not SBC is a dominant carrier.

In allowing SBC to provide advanced services, the Commission acknowledged that it was relying on the "section 208 complaint process," even though industry activists who have used it point out it takes months and requires tens of thousands of dollars. No company can afford to engage in a legal process this lengthy and expensive every time a DSL subscriber worth about $50 per month is arbitrarily disconnected. The FCC acknowledged (in a footnote on page 18) that EarthLink had complained that the section 208 complaint process is time consuming and resource intensive and ignores the practical need to redress anticompetitive behavior when it happens—and did nothing to address the problem.

Views from outside the game
Many regard the case as prejudged. On January 7, 2003, Internet guru David S. Isenberg wrote in his SMART Letter #82 "Here Comes the Bailout" that Powell clearly intends to give money to ILECs and allow their competitors to fail. Sharply disagreeing with Powell, he wrote, "Today, facilities-based competition is an oxymoron. Incumbent local telephone companies have facilities, but no competition. Locked-in customers of the Bell System monopoly financed these facilities. Arguably they belong to the customers as much as to monopoly-heritage telephone companies."

Bruce Kushnick, author of "The Unauthorized Bio of the Baby Bells" which is available for free download here, participates in an activist association called TeleTruth. TeleTruth documents ILEC executive compensation and perks, billing errors, and broken promises. Kushnick claims that ILECs, especially Verizon, have consistently promised to roll out fiber optic cable and 45 Mbps video to the home services, pocketed billions of dollars, and then reneged.

When commissioner Martin, in his December 12, 2002 statement, admitted that his argument that fiber be deregulated was inspired by a presentation by Verizon's Tom Tauke, TeleTruth responded, "In virtually all of their states, Verizon (NYNEX and Bell Atlantic) promised to roll out a fiber-optic service in exchange for financial incentives. They got the changes in law but kept the money and never rolled out any of the fiber-optic plans." The letter cited numerous actual examples.

Other activists are equally disappointed by the FCC. Sue Ashdown, president of the American Association of ISPs told us, "Line sharing matters if you are trying to bring DSL to your customers. If you're working with a company like New Edge, then you'll be cut off. If you're an ISP that does not offer broadband, this rule may not appear to be a direct threat. A more direct threat would be a rule saying that ISPs cannot buy phone lines. Could that be next?"

She added that if the FCC insists that each competitor build their own facilities, that would be like "asking for six airports in every city instead of allowing everyone to use one airport."

David Gutsky, executive vice president of the Association of Communications Enterprises, told us that the FCC is still deliberating and that there is real hope for a compromise giving ILECs the ability to not connect new ISPs in urban areas while still requiring them to connect ISPs in rural areas. However, he made the point that regulatory uncertainty is bad for the industry, noting, "The uncertainty is harming the CLECs now. In some respects, uncertainty is worse than a bad decision. You can react to a bad decision, but it's hard to react to uncertainty."

In the December 31, 2002 FCC decision, Martin said that the FCC will try to reach a decision on February 20, 2003, in response to a specific court case filed by the ILECs' trade association, the United States Telecom Association (USTA), on May 24, 2002. He admitted, "I am beginning to become concerned with whether we will be able to make that deadline."

Even if the FCC does reach a decision by February 20, 2003, further litigation seems a certainty. Some have suggested to ISP-Planet that both sides may already have appeals "drafted and ready to go" so a decision could be delayed for years.

All we can predict with certainty is more uncertainty—not just a month's uncertainty, but uncertainty for several years. It is likely to harm the small businesses, the small, nimble innovators, and help only those companies that can fall back on protected, secure, reliable sources of income, such as telephone directories—sources of income that have nothing to do with the provision of broadband Internet service.

— End