Copyright 2002 Warren Publishing, Inc.
In a current wireline broadband proceeding, FCC Commissioner Martin suggested Thursday that the Commission could treat DSL services in the same way as cable modem service. That would mean it would need to alter Computer II rules so incumbents wouldn’t be required to provide underlying transmission services as retail offerings.
“Providers nevertheless would have the incentive to provide broadband transport to unaffiliated ISPs on reasonable terms because only by so doing could they maximize the value of their investments,” Martin said in keynote at Practising Law Institute/FCBA annual telecom policy conference. He outlined where he believed FCC should head in local competition and broadband proceedings, with a level of detail that took some in the audience by surprise.
Martin called for three “immediate steps” the FCC should take to speed deployment of new facilities and advanced network infrastructure: (1) Adjusting the TELRIC pricing formula as part of a Triennial Review “for all new investment on a going- forward basis.” The existing formula fails to assess true risk of capital investment accurately in today’s economy and creates a deployment hurdle for broadband facilities, Martin said. Depreciation schedules in the TELRIC formula also should be adjusted to better account for new investment, he said. (2) Freeing incumbent service providers from “legacy” rules when they build new fiber local loops to customer premises. “I believe it is not ‘necessary’ for a competitor to have access to a new fiber loop,” he said, noting that U.S. Appeals Court, D.C., had criticized FCC’s unbundled network element (UNE) regulatory regime for not fully taking into account the ability of new entrants to make an infrastructure investment. (3) Providing regulatory relief for hybrid facilities while continuing to give competitors continued access. To that end, Martin said, FCC should freeze the service capacity level that must be made available on new or upgraded facilities to the service capacity level that the ILEC provided before making a new investment in hybrid facility. “ILECs should receive the benefits of making investments in new infrastructure deployment, but competitors should maintain the ability to receive access to end-user customers at the service capacity levels that they currently receive,” he said. One telecom lobbyist characterized Martin’s speech as “huge” in the level of detail it provided about his thinking on local competition and broadband proceedings and the direction the rest of the Commission may take. More broadly, Martin expressed disappointment that it didn’t appear that the FCC would be able to wrap up broadband proceedings by year-end. He noted that D.C. Circuit had voiced an expectation that the agency would complete its Triennial Review proceeding this year. “I am disappointed that we will not make it but I am hopeful that we will act soon,” he said. Citing a recent request for extension of D.C. Circuit’s mandate in USTA v. FCC decision until Feb. 20, Martin said he also was concerned about whether the FCC could meet even the later deadline. The court’s May 24 decision was considered favorable to Bell companies in its review of the FCC order issued in response to Supreme Court remand of the agency’s UNE rules. “If we are to meet that deadline, I believe we need to begin a more specific dialog with the public and with affected industries in particular, regarding the policy direction the FCC intends to take,” he said.
Martin called for a more “granular” unbundling framework at the FCC in response to D.C. Circuit’s UNE remand order. A more detailed unbundling framework would allow the agency to consider “unique” issues associated with rural and underserved areas, he said. As for provisioning, he backed “straightforward” test on whether unbundled local switching was needed to provide competitive services to consumers. “If other alternative facilities-based providers exist in a market and impairment associated with provisioning problems is addressed, then switching would not need to be provided,” Martin said. That would mean alternative facilities providers would have to use their own facilities and, if a “sufficient number of alternative providers are present, the Commission would assume that a wholesale market for switching is viable,” he said. Unbundling obligations still have purpose and need to remain in rural and underserved areas that lack facilities-based service providers, he said.
“At the end of the day, however, we need to recognize that if we fix existing provisioning problems that will allow competitors to easily migrate customers from the ILEC to their own facilities, then we cannot continue to require unbundling in markets where such competitive facilities exist,” Martin said.
Besides the UNE remand, in a second decision May 24, the D.C. Circuit vacated the FCC’s line-sharing rules, saying they didn’t adequately consider alternative facilities providers such as cable and satellite. Martin said the FCC had “no choice” but to consider that as it determined whether DSL providers should be treated as dominant carriers when offering high-speed Internet access services. “I’m in favor of declaring the incumbents nondominant in the residential high-speed Internet access market and not re-imposing our line-sharing obligations where a cable competitor exists for residential high-speed services,” he said.
Covad VP Jason Oxman said he supported some of Martin’s suggested measures to speed broadband deployment but expressed concern about Martin’s stance on line sharing that would not re-impose line-sharing obligations where cable competitor existed for residential high-speed services. “We would resoundingly disagree with that,” Oxman said, saying that was tantamount to a broadband duopoly framework. “A duopoly is not good for consumers and that’s what that would do,” he said. “Commissioner Martin’s proposal to limit, or even eliminate, loop unbundling — despite the core principles of the 1996 Act — simply permits the Bell companies to reclaim their network monopolies, and would bring a rapid end to broadband deployment in this country,” he said.
TIA, on other hand, praised Martin’s speech, particularly on policy issues such as fiber-to-home. “Commissioner Martin today took it upon himself to move the ball forward with specific, detailed proposals for resolving the host of complicated issues the FCC faces in these proceedings,” TIA President Matthew Flanigan said.
Martin expressed concern about the length of time it was taking the FCC to reach final conclusions on four “critical” proceedings pending since the start of this year — Triennial UNE Review, dominant/nondominant proceeding and wireline broadband and cable modem service rulemakings. “The records are complete, we have considered and debated the issues at length and the proceedings are now ripe for action,” he said. “We now are at the crossroads where choices must be made.” Martin was particularly concerned about risks that regulatory indecision created for service providers and manufacturers already facing capital crunch in current economy. “I believe the prolonged uncertainty regarding such critical issues as local competition and broadband may have aggravated existing market troubles,” he said. “Companies need to know the rules of the road and they need to be able to rely on them.”
The Commission needs to minimize further the “uncertainty” of those proceedings, he said. He said much attention had focused on potential deregulation of retail offering of broadband service but the most important question was how the FCC would decide the wholesale or input question. “I think most people already assume that we are going to treat Internet access as an information service,” he said. “The question that matters is the regulatory treatment of DSL and cable modem transmission.” Martin said the FCC might have contributed to “continuing confusion on this issue as a result of our ambiguous and somewhat contradictory statements in the wireline broadband proceeding and the cable modem proceeding.” He said he disagreed with what “some in and around the Commission” would like to see in the wireline broadband case. He said he disagreed with contentions that the FCC should take same approach with wireline broadband as it did with the cable modem proceeding — that it should tackle definitional issues but leave others for resolution until next year. “I’m very concerned about — and at this stage I would not support — such an approach,” he said.