Congress is calling: Major decisions loom for the FCC

Hot on the heels of the FCC’s decision to release the payments for NextWave spectrum and end the monumental logjam that has kept the wireless industry in leg irons over the past 18 months, Powell and company are back on track to move on the Triennial Review and regulation of the wireline industry in general--and not a moment too soon, according to Senate Majority Leader Thomas Daschle (D-S.D.). Sen. Daschle urged the FCC to make its decision on the future of unbundled network elements (UNEs) by early next year, although his position on the issue of increasing/decreasing the subsidies for non-facilities based competitors seems to be neutral at this point.

I believe that Sen. Daschle’s efforts are both timely and well intentioned since it helps put the FCC in a mindset to focus on the big issues affecting the industry after the WorldCom-induced sideshow that has characterized the FCC’s focus over the summer. However, I take offense at the majority leader’s caveat about residential rate pricing. Of course I understand that politicians are always wary of looking like they had anything to do with any sort of price increase for their constituents, but at this juncture in the industry, artificially keeping prices below market levels should be the last thought on the minds of the FCC’s staff and commissioners. Keeping the industry alive should be the focus.

That being said, the FCC must make a decision on how competition will evolve now that we are significantly removed from the 1996 Telecom Act to see clearly what has happened. Competition is booming, but it is neither uniform nor ubiquitous. The FCC shows signs that it is recognizing this and changing policy to meet the needs of a post-271 America. Clearly, innovation and investment by the incumbents should be rewarded. The question is whether or not the FCC’s continued support for the UNE-P platform combined with disastrous state regulatory decisions will inhibit or even dash investment by the likes of BellSouth and SBC.

Recognition of competition should mean reduction in regulation, but the FCC now finds itself in a strange position. Both it and the state Public Service Commissions have recognized openness to competition on the part of the Bells who now have entered the long-distance market in nearly half of the states, but now we are finding that “lack of market share” is driving policy although this not in line with the law. The FCC could reverse calamitous trends in UNE pricing by making changes to the regulatory scheme as part of the Triennial Review, but will it?

To my way of thinking, it’s time to do something. The FCC has to step up to the plate and decide what is more important, (the number of) competitors or (the amount and benefits of) competition. Otherwise, both will wither on the vine. Policy must be geared toward promotion of broadband adoption and deployment, investment in the network, benefits to consumers and encouragement of market law (not necessarily in that order). To hedge at this point in our troubled industry would send out mixed signals to current and potential investors and result in another year of uncertainty and indecision, which could just be the proverbial straw that breaks the camel’s back.

Robert A. Saunders is a senior analyst with The Eastern Management Group Inc., a management consulting firm focused exclusively on the communications industry. He can be reached atrsaunders@easternmanagement.com.