FCC ‘Discouraging Competition,’ CLEC Officials Say

Falvey’s firm represents Core Communications. Last week, Core became the first company to challenge the Universal Service Fund order (CD Dec 5 p11). “It’s really ragged and it’s really slanted toward the incumbent telephone companies,” Lariat founder Brett Glass said of the universal service order. Analysts agree that competitive telcos fared the worst under the USF reforms (CD Oct 28 p1), but the FCC has said it asked every sector to sacrifice. CLECS asked for -- and got -- several items in the order, FCC officials have told us.

But universal service isn’t the only area where CLECs are feeling abused. CLEC officials, including Falvey and Glass, have complained about what they see as FCC stalling on such matters as “self help” in intercarrier compensation disputes, and the small business broadband and wholesale market. “Notice that there’s a common thread there. This FCC appears to be ignoring and in fact discouraging competition,” Glass said. “If you're going to be competitive, you do need the protection of antitrust law. And the FCC is not adequately replacing that."

The biggest issue for CLECs is special access. Earlier this summer, CompTel and a handful of CLECs organized and brought a mandamus petition in the U.S. Court of Appeals for the D.C. Circuit, arguing that the FCC has “abdicated its statutory mandate” to regulate special access prices. “The record in the Special Access Docket -- nearly a decade in the making -- is replete with statistical and anecdotal evidence of the harms caused by the FCC’s refusal to act,” the CLECs said in their petition. “And the agency itself has acknowledged that this problem warrants extraordinary action. The FCC’s failure to complete its special access rulemaking has surpassed unreasonable and is plainly egregious."

On Monday, the deadline closed for a second round of data in the special access proceeding, docket 05-25. FCC officials said the issue is complicated and Genachowski’s FCC is the first to analyze the special access market “holistically.”

"We're moving with diligence in a very complicated proceeding,” an FCC official said. “We're asking for data that the commission has not previously asked for. It’s a big issue. The commission is moving forward on multiple fronts.” The FCC has also criticized CompTel members for not responding to the commission’s first data request earlier this year (CD Oct 12 p16).

USTelecom Vice President Glenn Reynolds said the special access controversy is becoming increasingly moot as the telecom world moves to fiber-based, all-IP networks. “So much of this debate is about old-line technology in a new technology world,” he said. “Just because of all the noise out there, the FCC might feel pressure to do something. But to the FCC’s credit, so far they have insisted on gathering data and doing the right thing."

CLEC anger is not universal. “Everybody thinks the thing they have before the commission is the most important thing in the world. But really, we want the commission focused on our biggest ticket items,” said EarthLink Senior Vice President Chris Murray. Murray said AT&T’s proposed acquisition of T-Mobile would have been disastrous for his sector, so he was gratified that the FCC got it right. “I think this commission has shown courage in the face of really significant political pressure and I'm hopeful that will extend to special access,” he said of AT&T/T-Mobile. “I think the stage is set now for the FCC to do something meaningful on special access."

CLECs have long felt they were on the outside looking in at the commission, Falvey said. But this commission has been particularly disappointing because CLECs have looked to the Democrats to be more sympathetic to their cause, Falvey said. “I think a lot of Democrats were expecting a warming period where the commission was going to be very active in promoting competition,” he said. “And it hasn’t happened.”

Genachowski was on Reed Hundt’s staff when the FCC implemented the 1996 Telecom Act, an era that many CLEC officials still look upon fondly. “You really have to go quite a ways back to [William] Kennard and Reed Hundt to find a commission that’s actively pro-competitive,” Falvey said.

Glass said Genachowski’s FCC is more focused on big-ticket Democratic donors such as Google, or incumbents and big wireless carriers. “It seems the FCC is bending over backwards to make them happy at the expense of consumers and competitors, which is unfortunate,” Glass said. “Maybe it’s just the politics of this particular FCC. They push issues like special access aside to focus on politically easier issues like Net Neutrality. And they did it to appease a big Obama donor -- Google."

It’s not as if CLECs don’t contribute to campaigns, though. Employees of Paetec, XO, TDS Telecom, tw telecom, Cbeyond and CompTel have given more than $337,000 in political contributions since 2001, Federal Election Commission records show. More than 39 percent of those donations have gone to Democrats, the records show.

The problem is that, by campaign finance standards, CLEC contributions are the proverbial drop in the bucket. Twelve of AT&T’s top corporate officers have given more than $270,000 in donations since 2001, the records show. AT&T’s top lobbyist, Jim Cicconi, has given more than $64,000 by himself, FEC records show.

Politically outgunned, or at least outfunded, CLECs will double down on two of their most reliable allies, Democratic Reps. Anna Eshoo (Calif.) and Ed Markey (Mass.), a CLEC official told us. Competitive telcos are already organizing fundraisers for the pair, the official said. Since 2001, Markey has received $25,000 in donations from employees at Paetec, tw telecom, XO, Cbeyond and CompTel, FEC records show. Eshoo has only received $1,000 in a single donation from a Cbeyond employee, the records show. But observers can expect those figures to grow ahead of the 2012 elections, the CLEC official predicted.