Walk, don’t run

Speaking at a Senate Commerce Committee hearing on broadband and local telecommunications, Rep. Ed Markey, D-Mass., said the industry is not in a crisis and that the government, specifically the FCC, should “stay the course,” regarding the current regulations that govern telecommunications carriers.

There is little doubt the Telecom Act is flawed. What remains in question is just how flawed. Despite the painfully slow progress that has been made in opening local markets and the relative lack of progress the Bells have made in building out their data networks, it is too soon for a radical overhaul of the Act, whether it be through new legislation drafted by Congress or new rules drafted by the FCC.

Markey suggested that Congress and the commission should resist the temptation to deregulate the telecom industry – either by statute or order – and dismissed the notion that the Act has failed.

Markey said the fact that competitive carriers control about 8% of the access lines nationwide and that incumbents have been approved for in-region long distance in 13 states – a seemingly paltry figure given that the Act is more than six years old – is “quite remarkable,” considering the “four years of foot dragging” by the Bells between the enactment of the ACT and the first 271 approval, Verizon’s in New York State.

He said that if Congress and the FCC “hold the line” it wouldn’t be unreasonable to expect remaining CLECs – despite the demise of many of their brethren – to one day account for 15% of the nation’s access lines. “That would be a helluva lot of movement after 100 years of zero,” Markey said.

Though highly knowledgeable and well respected, Markey isn’t the most unbiased observer, as he is one of the Act’s principle authors. However, his advice should be heeded, particularly since others of influence apparently share his perspective.

Last week, the Supreme Court affirmed the FCC's total element long-range incremental cost (TELRIC) formula for determining the rates at which incumbent telephone companies must make their facilities available to competitors. In doing so, Markey believes the Court also affirmed the Act.

There are any number of steps that can be taken as interim measures short of a radical overhaul of the Act. Congress should find out once and for all whether the Bells have been dragging their feet, as Markey alleges, and to what degree. Start by giving FCC Chairman Michael Powell the fining authority he seeks. But don’t stop at $10 million per incident. That’s not enough for companies that generate billions in revenues each year. Make it $50 million per incident. Or $500 million. Whatever it takes. Rest assured there is a figure out there somewhere that will get the Bells attention.

At the same time, the FCC shouldn’t ignore the legitimate concerns of the Bells. They are on solid ground when they say they should not have to make new facilities to competitors unless they can make a reasonable return on their investments. Accordingly, the FCC should adjust the formula for UNE rates so that they land somewhere between TELRIC and the market-driven prices the Bells seek.

The FCC should also force state commissions to apply whatever UNE rate formula it decides is proper on a more uniform basis. Granted, conditions vary from region to region and from state to state, but the current application of TELRIC is so ridiculously capricious that one can hardly blame the Bells for their disdain of the process.