A D.C. Circuit Court ruling made in March is causing a crisis now. As the FCC, the court, the White House, and major Internet companies angrily trade blame, we approach a period of literal telecom lawlessness.

by Alex Goldman ISP-Planet Managing Editor [May 17, 2004]

If you felt you'd been ignored for eight years, you'd have a right to be angry. But judges are supposed to above that sort of emotion.

On March 2nd of this year, the D.C. Circuit Court issued a decision (see Competitors React to Circuit Court Decision) saying that the FCC's Triennial Review Order (TRO) was, in part, erased, with a deadline of only 60 days.

Acidly, the court wrote, "this deadline is appropriate in light of the Commission's failure, after eight years, to develop lawful unbundling rules, and its apparent unwillingness to adhere to prior judicial rulings."

On March 31, the FCC responded by passing the buck (a typical maneuver—see, for example, Triennial Review Part III: Another Unfunded Mandate). It wrote a letter to the carriers and trade associations, "urging them to begin a period of commercial negotiations designed to restore certainty and preserve competition in the telecommunications market."

But passing the buck will do neither. The FCC has, in theory, been trying to figure out a way to both encourage competition and create certainty since the Telecommunications Act of 1996, and it has failed to do so, due to fundamental, partisan disagreements about the purpose of regulation (see Regulatory Future? More Uncertainty).

Instead, uncertainty has plagued the Internet industry, promoting only those businesses that could rely on revenue from outside it to subsidize their Internet investments.

It also asked for the companies to negotiate over a period of 45 days. Last week, the final deadline passed. The result is deregulation by accident, and the Bells are taking advantage of it.

Rather than negotiate, on March 31, SBC issued a posturing, political press release, saying it was negotiating in good faith. Saying so in a press release, however, is not the same as doing it.

CompTel/ASCENT responded on the same day with a proposed framework for negotiations. A key item in the framework was that the Bells should not force the competitors to sign non-disclosure agreements (NDAs) that would prevent them from sharing information with regulators, or that would require them to waive legal rights.

The FCC did not respond.

On May 14, CompTel/ASCENT's CEO H. Russell Frisby, Jr., issued a statement describing why negotiations had not progressed (in response to a call by AT&T for independent arbitration) saying in part:

AT&T's difficulties typify the frustration encountered by any competitive carrier seeking to negotiate in good faith with the Bells. Understandably, these problems are magnified as the size of the competitor decreases. Small carriers, for more than a month now, have been faced with "take-it-or-leave-it" offers and other strong-arm Bell negotiating tactics designed, ironically, to prevent competitors from moving to their own facilities. The Bells' have been flouting the law, with no apparent intentions to come to viable agreements, as the FCC has requested.

The situation is even, apparently, worrying the White House. On Friday, the Wall Street Journal wrote, in an article called "Bush Doesn't Want Telecom Win to Backfire" (what win?):

Without the rules to keep rates in check, regional phone companies could well boost the prices they charge rivals to use their phone lines. That cost would likely be passed on to consumers, industry and government officials say.

With Americans already outraged about paying $2 a gallon for gas, the prospect of a phone-bill increase has Bush administration officials worried about the election fallout if consumers vote with their pocketbooks.

The Wall Street Journal added:

Now, the Republican majority at the FCC, as well as Michael Gallagher, the Commerce Department's acting assistant secretary for communications and information, are applying intense pressure to the nation's biggest phone companies to quickly reach a resolution that keeps a lid on rates short-term. It also would avoid a Supreme Court appeal that would prolong the uncertainty.

Unfortunately, as we've been arguing for the past year and a half, uncertainty is the most likely future due to fundamental, partisan disagreements about the purpose of regulation (see Regulatory Future? More Uncertainty).

And, as a distinguished pair of pro-competition consultants recently wrote on ISP-Planet (see USTA v. FCC: A Decision Ripe for the Supremes), the decision will probably go to the Supreme Court, prolonging uncertainty.

Of course, for a journalist, there's a benefit to all of this. Had the negotiations been sincere, they would have probably been covered by binding NDAs (ones that would not require ISPs to give up their rights). They would have been secret.

Instead, there was a lot of political posturing, starting with SBC. That's public, we've linked to it here, and you can read every word.

Personally, though, I'd rather have a growing telecom economy than a newsworthy dispute that's easy to write about—a dispute that punishes competition, investment, and innovation.

— End