FCC urged to move faster on policy reforms

BOCA RATON, Fla. – While acknowledging that the FCC has taken some positive steps and faces a difficult task ahead, speakers at the U.S. Telecom Association said today the commission needed to accelerate the various rulemakings currently under consideration and adjust its policies to restore investor confidence in a muddled – and muddied – telecom sector.

Scott Ford, president and CEO of Alltel, said the commission’s policies concerning unbundled network elements (UNEs) and the TELRIC (total element long range incremental cost) pricing formula have “raised the complexity” of the telecom industry to a point where investors are “running away” from the sector.

“Capital is attracted to stability and profitability,” Ford said.

Scott Cleland, CEO of Precursor Group, said the FCC has “worshipped at the feet” of competition to such a degree that it acted to determine the winners and losers, instead of allowing the market to determine their fate. According to Cleland, the FCC decided the winners were to be competitive carriers and MCI/WorldCom, with incumbent carriers the losers.

“The FCC is still hard at work at that goal. Which makes them an equal opportunity destroyer of capital,” Cleland said.

Another mistake the FCC made was to decide it was in the best position to determine wholesale rates. “Why bother with the market setting prices when we know what the perfect world and prices should be,” said Cleland.

But while the FCC created the TELRIC formula, state commissions administer it, and that’s what really has investors spooked, according to Blair Levine, managing director of Legg Mason and one-time chief of staff to former FCC chairman Reed Hundt.

“It’s very troubling that we have dual regulation,” he said. “From an investors’ perspective, they have no idea what the result [of the rate proceeding] is going to be. That’s very problematic,” Levine said.

Levine called for a clarification and streamlining of the respective roles played by the FCC and the states. “That needs to happen before investment money can flow back to the industry,” he said.

FCC Commissioner Kevin Martin acknowledged that the commission needed to pick up the pace of its decision-making, but said the issues are complex and admitted that the FCC is “struggling” with its triennial UNE review.

“We have been too slow in our past actions. We need to restore investor credibility,” Martin said. “But how do we balance the importance of developing a wholesale market against encouraging the deployment of new facilities by incumbents? That’s a tough balance.”

Tom Tauke, senior vice president of public policy and external affairs for Verizon Communications, said that if the FCC was truly interested in developing a vibrant competitive environment, it would place its focus on the overall health of the sector.

“It’s very hard to develop competition in an industry that is unhealthy,” Tauke said. “The health of the industry is job one. The FCC needs to figure out what’s wrong.”

At the top of the list are regulatory policies that discourage infrastructure investment, said Tauke.

“The problem with the industry is not a lack of growth. We have more minutes flowing over our networks than ever before,” Tauke said. “The problem is that the system doesn’t provide an economic return. No one is looking for governmental guarantees, but we should be in an environment where we can achieve a return on investment.”