FCC Plans to Vote on Qwest Forbearance by June 15
The FCC plans to decide the fate of unbundling obligations for Qwest in the Phoenix area by June 15 to ensure that a June 22 deadline isn’t missed, agency officials said. The decision will be based on a market power analysis outlined in the FTC-Department of Justice Horizontal Merger Guidelines, they said. The officials predicted that forbearance is likely to be denied.
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The FCC should keep in mind that “retaining monopoly-style regulation of Qwest in Phoenix” will undermine the company’s “ability to compete against Cox for broadband services, to the ultimate detriment of Phoenix customers,” said Steve Davis, a Qwest senior vice president. The telco also has urged the commission not to “reasonably ignore wireless substitution” in Phoenix. When the commission sought comments on whether it should apply the market power analysis in April, it wanted filers to say whether “record evidence supports granting forbearance,” and how to determine “whether mobile wireless service and wireline service are in the same relevant product market,” the FCC said in the public notice.
There was strong support for the method coming from several competitive local exchange carriers, while Qwest and other incumbent LECs, like AT&T and Verizon, claimed that the method did not apply to the statutory forbearance criteria. Davis said Qwest has lost more than half the market in the Phoenix area. “Any standard that fails to recognize these market facts is inconsistent with the forbearance statute and is destined to retain regulation” that is unnecessary and counterproductive, he said. A Wireline Bureau spokesman declined to comment.
The commission will likely apply the same standard to remands involving forbearance requests from Verizon and Qwest, an FCC official said. In 2007, Verizon was denied when it sought relief in six markets, and Qwest previously sought relief in four markets, including Phoenix, a request that the FCC voted against last year. The forbearance order this month will address the questions in the remand from the U.S. Court of Appeals for the D.C. Circuit, said Integra Executive Vice President Jeff Oxley. The Qwest decision is foreshadowing the Verizon 6 petition and “a decision on it probably won’t be long in coming after they issue this [Qwest] order,” he said.
While many CLECs said the data they've shown the FCC warrants a denial of the petition, the commission’s 2005 grant of Qwest’s forbearance request in Omaha has them worried that the situation could once again work in the telco’s favor this month. “After Omaha there was an absence of CLECs participating in the wholesale market,” said CompTel Assistant General Counsel Mary Albert. “The few competitors that were there left the market."
Paetec has retained a small number of national account customers in Omaha, but lost about 97 percent of its consumers, said William Haas, public policy vice president. “In Omaha, when a customer leaves [a CLEC], they go to either Qwest or a cable company for service,” he said. “Investment has shrunk in Omaha. … That’s not the case in the market where unbundled network elements still exist.” The unbundled network elements “put us on a relatively level playing field as the incumbents,” he said.
Davis said evidence of competition in Phoenix is overwhelming. CompTel, the Arizona Corporate Commission and others have pushed for the FCC to apply a granular analysis that separately assesses competition in the business and retail markets. “Cox covers a lot of the residential market, but not the business market,” Albert said. “If you were to look at the market as a whole without separating out various components, you might get a distorted view of how much competition there is.”