STATES STRUGGLE TO UNTANGLE EFFECTS OF COURT'S TRO RULING

The court said the FCC unlawfully delegated UNE authority to the states. Following the oral hearings last month, at least 6 states suspended their TRO cases after legal observers saw a strong likelihood that the FCC’s delegation wouldn’t hold up in court.

Comr. Bob Nelson of the Mich. PSC, who heads NARUC’s Telecom Committee and NARUC’s Triennial Review Task Force, said a few states will terminate their TRO proceedings in light of the court ruling, but said he hoped most states would continue with their TRO cases despite the court ruling. He said the decision didn’t render the state TRO reviews moot: “If the FCC must make the decision on unbundling, it will need a record on which to act. Nothing in this ruling bars the FCC from consulting with the states, reviewing the states’ records and considering their findings as recommendations.”

Fla. PSC Comr. Charles Davidson said his agency suspended its TRO case after the D.C. court ruling. He said the PSC held one final session to admit evidence into the record and then halted the case until the legal situation is cleared up. He said the states should conserve their resources rather than pursue TRO cases that the court rendered moot: “The best course for the states would be to wrap up now and offer what they have to the FCC for its record.”

Me. PUC Comr. Tom Welch said the court wants the FCC to “craft a national unbundling policy on a local basis. There’s a role for the states to act as fact-finders, but it’s the FCC’s job to define what markets and impairment mean.” He said states shouldn’t spend any more resources “doing a job that should be done by the FCC.” Colo. PUC Chmn. Greg Sopkin said he was “happy that a court finally told the FCC in no uncertain terms that it is their job to determine the extent of unbundling regulation.” Colo. suspended its TRO case before the court ruled. He said that once the FCC does come up with a lawful unbundling regime, that will clear the way for investment to again flow into telecom, which would be good for his state. Sopkin noted the ruling included a 60-day stay: “The question is what will happen if that stay goes away. I don’t think anyone’s figured that out.”

Meanwhile, the prospect of appeals to the U.S. Supreme Court will leave things uncertain for the states. The FCC will seek an appeal. NARUC Pres. Stan Wise of the Ga. PSC said he agreed that the appeals court’s rationale for vacating the FCC’s delegation of UNE authority to the states “suggests the FCC should immediately seek certiorari of this decision.” He said that so long as the FCC’s national findings meet Telecom Act requirements, the plain reading of the act should permit an FCC delegation to the states that choose to participate. Wise said NARUC will be filing its own appeal of the ruling. -- Herb Kirchhoff

TRO Notes…

As part of its decision on the FCC’s Triennial Review Order (TRO) Tues., the U.S. Appeals Court, D.C., threw out an appeal by the National Assn. of State Utility Consumer Advocates (NASUCA) for lack of standing. The court describing NASUCA as made up of organizations “designated by… state governments to represent the interests of utility consumers in regulatory and judicial proceedings.” Utility consumer interests “are clearly affected” by the TRO, the court said, but “nothing in the administrative record or NASUCA’s opening brief establishes that NASUCA is qualified to represent those interests in federal court.” In a statement issued late Tues., NASUCA said “the grounds cited by the court were not raised by any party to the appeal, contradict the very purpose for which NASUCA was created and would deny consumers representation in federal court.” NASUCA said it’s “reviewing its options on this specific issue crucial to consumers.”

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The practical result of the ruling Tues. by the U.S. Appeals Court, D.C., that vacated much of the FCC’s UNE order “remains very much in doubt,” Legg Mason analysts said in a research report Wed. Legg Mason said there are 3 factors to take into account: (1) Whether the U.S. Supreme Court hears the case. If it does “the current framework is likely to stay in place for some time.” (2) How the FCC rewrites its rules, “particularly how it treats a transition.” The report said: “While the court significantly constrained the FCC, there are still likely to be some ways in which the FCC could, if it chooses, draw out somewhat the ability of current UNE-P providers to use the platform to keep customers until they can transfer to an alternative platform.” (3) Renegotiation of interconnection agreements, “particularly in light of state oversight of that process and ongoing Bell Sec. 271 UNE duties.” Legg Mason analysts said “this is an underappreciated wild card, as states may exercise their authority over the process in ways that could prolong some of the current framework.” Medley Global Advisors concluded that “the battle over the fate of unbundled switching is far from over and the course the FCC will take going forward is far from certain.” Medley said in a report it expected Congress to weigh in through hearings. “Regardless of what action the Commission takes, UNE-P will probably not be eliminated from the market any time soon,” the report said. Access to UNEs is written into interconnection contracts “which are legally binding so regulatory uncertainty for the Bells will probably remain at least until next year,” it said. Noting the FCC will have to convince the U.S. Solicitor General to seek U.S. Supreme Court review, the report predicted that “if the solicitor general agrees to file for Certiorari, there is a strong chance the Supreme Court will take up the case.”

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SBC said Wed. it was offering to negotiate “commercially reasonable UNE-P wholesale rates” with AT&T, MCI and other competitors. In a letter to competitors that rely on the UNE platform, SBC Chmn. Ed Whitacre promised to keep in place 90 days PUC-approved UNE-P wholesale rules and pricing. He offered to immediately begin negotiating commercial UNE-P wholesale rates acceptable to all. The offer came a day after the U.S. Appeals Court, D.C., vacated most of the FCC’s Triennial Review Order, including the Commission’s decision to delegate UNE review decisions to state PUCs (CD March 3 p1). Whitacre called the decision “a watershed event,” in a letter to AT&T Chmn. David Dorman similar to those SBC sent other competitors: “However, SBC values your wholesale business and wants to keep you and your local UNE-P customers on the SBC network.” Whitacre said SBC was extending “an offer of direct, one-on-one talks between your company and ours” concerning commercially reasonable pricing for SBC’s UNE-P product. Whitacre said such a “private commercial contractual arrangement” allows competitors to obtain a configuration akin to the existing UNE-P “but with certainty of price and availability under a multi-year arrangement at mutually acceptable prices.” To this end, SBC told Dorman and others it would keep the mass market UNE-P serving arrangements in place at PUC approved rates 90 days. During that period, SBC said it would negotiate for an “orderly transition” from an existing interconnection agreement to a private commercial arrangement. “Neither of our companies stands to benefit from continued uncertainty in the industry,” Whitacre said: “It is up to all of us to close this long, costly and debilitating chapter in our industry’s history.” In a statement, Whitacre said the telecom industry had been working “under prices that are unrealistic and under rules that have just been declared illegal, for the third time.” Whitacre said in his letter SBC would contact competitors in the next week to start negotiations. The D.C. Circuit said it would temporarily stay its vacating orders, delaying issuance of the mandate for 60 days or until any petitions for rehearing were acted upon. If the court lifts the 60-day stay before the FCC acts, Legg Mason said parties probably would get into disputes over whether that meant UNE discounts were eliminated or action must await a new FCC decision. AT&T responded to SBC’s offer with disdain. “We are thankful that SBC has proved beyond a shadow of a doubt their intent to kill competition in the local market and its associated benefits to millions of Americans,” said an AT&T spokeswoman. “Yesterday’s D.C. Circuit Court decision threatens consumers and small business owners across this nation. Now SBC is showing how damaging that decision will be.” The company noted that in 2002, SBC proposed a $26 nationwide rate for its UNE-P platform. This would have represented “negative margin opportunities” for competitors ranging from $4.97 to $10.43 per customer, AT&T said. “The Bells are still in control of a bottleneck facility and SBC’s olive branch is just stems with thorns that will bleed competitors dry,” AT&T said.