Martin to ILECs: Invest, and you will be free

As incumbent carriers seek more regulatory relief before they build out fiber networks, FCC Commissioner Kevin Martin said he believes broadband is primed for investment and deregulating legacy networks is unnecessary.

In the Triennial Review Order passed earlier this year, the FCC ruled ILECs would not have to share proposed fiber infrastructure with competitors at TELRIC prices, something incumbents wanted before making the massive investments in fiber to the premises. However, RBOCs have said the order’s language does not provide enough clarity for the investment community, which will be funding the build outs.

Martin said he does not believe the language is as unclear as perceived by RBOC representatives – most notably, Tom Tauke, Verizon Communications’ senior vice president for public policy and external affairs – but is willing to address these issues regarding upgraded networks. However, Martin discouraged efforts to include deregulation of legacy networks in the debate.

“To the extent incumbents are seeking to get out of regulations that apply to their legacy infrastructure or to diminish competition for legacy voice services that Congress expected, I will be less inclined [to clarify broadband questions],” Martin said. Verizon has no intention of altering legacy regulations, but the RBOC has a “sense of urgency” to gain regulatory clarity before it begins deploying fiber networks next year, according to a company spokesman.

Incumbents have a similar “window of opportunity” to upgrade their networks that cable providers had in the 1990s, when the commission agreed to keep advanced services deregulated, Martin said. In fact, he said ILECs have the advantage of seeking money from investors at a time when they have less debt and greater cash flow than the cable operators had a decade ago.

Investing in new infrastructure will allow incumbents to stop depending so much on regulated, low-margin legacy voice and profit from higher-margin advanced services that are largely deregulated, Martin said. Whether RBOCs avail themselves of this opportunity will influence his consideration of future deregulatory requests, he said. “For years, incumbents have been saying ‘Deregulate our provision of broadband, and we will invest,’” Martin said. “But now that broadband deployment is deregulated, they are saying ‘Deregulate our provision of our historically monopoly service – basic phone service – and we will invest in broadband.’ They essentially are saying, ‘Free us, and we will invest.’

“We have responded, ‘Invest, and you will be free.’”

Questions whether the FCC or the RBOCs will fulfill promises made remain at the root of the investment standoff, according to Scott Cleland, CEO of The Precursor Group.

“The triennial majority [on the FCC] is very skeptical of Bell pledges about investment,” Cleland said. “And the Bells are highly skeptical that there is anything good for them in the Telecom Act without strings attached.”