Powell to Congress: Raise fine limit to $10 million

FCC Chairman Michael Powell, in a letter sent to the Senate and House commerce committees, has asked Congress to increase the limit on fines imposed on carriers who violate local competition provisions of the Telecommunications Act of 1996 from the current $1.2 million to at least $10 million per incident.

Powell recently said incumbent carriers view the current level of fines as merely a cost of doing business that they are willing to pay to maintain their dominance in local markets. In his letter to Congress, Powell maintained this theme.

“Given the vast resources of many of the nation’s ILECs, this amount [$1.2 million] is insufficient to punish and deter violations in many instances,” he said. “Congress should consider increasing the forfeiture amount to at least $10 million in order to enhance the deterrent effect of Commission fines.”

Powell recommended Congress increase the statute of limitations imposed on commission investigations of local competition violations beyond the current one-year period. He also requested that the FCC be allowed to award punitive damages in formal complaint cases.

“This time period has often proven insufficient, especially given that the carriers whose actions are being investigated usually possess much of the information needed to determine whether a violation has occurred,” Powell said. “A longer statute of limitations period would afford the Commission a better opportunity to thoroughly investigate an alleged violation.”

A spokesman for Verizon Communications suggested that Powell’s latest effort to turn up the heat on the ILECs is unnecessary.

“Competitors currently control 20% of the lines in New York and 16% of the lines in Massachusetts, and we’re continuing to lose market share in those states,” he said. “In the states that we have been allowed to enter, we have demonstrated that we have opened our local markets to competition, and we’re committed to opening our other markets. It’s just not happening as fast as some people would like.”

That’s the whole point, said Powell.

“Investors who were previously optimistic about the business plans of certain CLECs have … turned cold on those plans at the very time that they have begun to bear fruit,” he said in the letter. “Although there are examples of CLECs with workable plans … in some cases, CLECs may have been stymied by practices of incumbent local exchange carriers that appear designed to slow the development of local competition.”

Predictably, CLECs are embracing Powell’s stance.

"Chairman Powell's action is another step in the right direction for the competitive communications industry,” said Bob Taylor, president and CEO of Focal Communications, in a statement.

“It's about time the incumbents get a huge slap on their wrists for not fully cooperating with competitive carriers across the country," added Taylor, who is also chairman of the Association for Local Telecommunications Services (ALTS).