FCC'S POWELL PLAYS THE SPOILER

The NPRM, which may be considered by the FCC as early as May 9 when the comment period ends, would require providers of broadband Internet services — even cable, satellite and wireless providers — to pay into the universal service fund. The FCC is concerned that its ability to provide universal service would erode as voice traffic migrates to other technologies unless the universal service fund burden is extended to all platforms.

This component indirectly addresses a long-standing complaint from Bell companies that they are held to a different regulatory standard than other providers of high-speed Internet services — notably, cable, which has 70% of the broadband market.

The NPRM is “long overdue,” said Lauren “Pete” Belvin, vice president of federal policy and law for Qwest Communications. “It's exciting that the commission is trying to develop a regulatory approach that treats everyone the same, regardless of who they are or what kind of platform they're using,” she said.

But Dick Metzger, vice president of regulatory affairs for competitive carrier Focal Communications, countered that the NPRM is akin to “using a bazooka to kill an ant.” Metzger is concerned the rulemaking would enable Bell companies to squeeze CLECs out of the last mile altogether. “What would prevent them from somehow adding a Web component to their POTS?” he asked. “They could then make the argument that POTS is exempt from the facilities-sharing requirement.”

Wanda Montano, vice president of regulatory affairs for US LEC, accused Powell and the FCC of again catering to incumbent carriers. “This NPRM is 100% ILEC and zip to everyone else,” she said.

Montano added that instead of bringing clarity to the situation, the NPRM only clouded the future for CLECs. “How do you build any kind of business plan in this environment?” she asked. “It's like building a house on shifting sand.”

She also suggested that Powell is pushing the NPRM as means of establishing his legacy. But the motivation is much more simple, said Scott Cleland, president and CEO of The Precursor Group. “The FCC not only wants to encourage broadband deployment, it wants to get away from being the nanny for broadband,” he said.

Bill Bane, vice president for Mercer Management Consulting, agreed: “The FCC is saying it's getting out of the meddling business.”

Though Nancy Kaplan, vice president for Adventis, believes the NPRM could make Tauzin-Dingell less relevant, the rulemaking might help the bill pass the Senate, where it faces opposition. “The rulemaking is giving a lot more publicity to the ILEC side of the debate, and the Senate won't be able to ignore that,” she said.

Tauzin-Dingell proponents long have feared that Sen. Ernest “Fritz” Hollings, D-S.C., will attempt to quash the bill in committee and push legislation that would force the structural separation of incumbent carriers. Now proponents are afraid Hollings will see the FCC's actions as a preemptive shot over the bow.

Christine Heckart, president of TeleChoice, said those fears are well founded, noting that senators don't like to be pushed around. And although Hollings' proposal has gained little support, it would be a better solution than Tauzin-Dingell, she said. “The only way you're going to be able to create long-term, sustainable investment in this industry is to split the RBOCs into wholesale and retail units,” Heckart said. “And the FCC isn't going to do that.”

Others fear that Hollings might let Tauzin-Dingell reach the Senate floor only to attach amendments that either meet his agenda or make the legislation more difficult to pass. While that could happen, the more immediate concern for Tauzin-Dingell proponents is the possibility that the same scenario will occur in the House.

The most notable of the proposals is a line-sharing amendment from Reps. Edolphus Towns, D-N.Y., and Steve Buyer, R-Ind., that would give CLECs access to existing remote terminals but not new facilities. A Beltway insider who requested anonymity said this amendment wouldn't be enough to derail Tauzin-Dingell, though it likely would shrink the margin of victory to the point that the bill squeaks through.

If that's the case, it might be better for all concerned if Tauzin-Dingell dies in the House, particularly because the FCC's NPRM gives the Bells the relief they've been seeking and then some. Industry observers say Tauzin-Dingell must pass by a wide margin in the lower chamber to have any chance of reaching the Senate floor, much less passing the upper chamber.

Said Belvin: “You would have to be deaf, dumb and blind not to realize that Tauzin-Dingell probably isn't going anywhere in the Senate.”