USTelecom Seeks Ruling that ILECs Are No Longer Dominant in Switched Access

"The Commission has focused significant resources recently on preparing for the demise of the [public switched telephone network] -- a notion that is fundamentally at odds with the continued treatment of ILECs as ‘dominant’ when offering switched access voice services,” USTelecom wrote (http://xrl.us/bn674z). An “imbalanced regulatory scheme” based on the idea that the PSTN still constitutes a monopoly platform for the delivery of voice services can “no longer be justified” given that ILEC switched access service has been “displaced by wireless and VoIP connections,” the association said.

"We'd like the FCC to begin a dialogue,” said McCormick in a blog post Wednesday (http://xrl.us/bn676t). “It is time to talk about updating this approach to voice services regulation so that we can remove obstacles to a more competitive market, encourage more investment and bring more benefits to consumers. This is the conversation we are asking the commission to begin."

By declaring ILECs no longer presumptively dominant when providing interstate mass market and enterprise switched access services, the ILECs would be freed of the requirement to file tariffs with applicable cost support for services on a minimum notice of seven days or more, and a rule requiring they wait 60 days for grant of applications to discontinue, reduce or impair services. CLECs can file tariffs on one day’s notice and without cost support, and need only wait 30 days for action on applications to discontinue service, USTelecom said. Dominant carriers also get streamlined treatment on “far fewer types of transfers of control” under Section 214 than non-dominant carriers, USTelecom said.

The petition is less concerned with seeking extensive relief than with examining the principle that ILECs are still dominant, said Jonathan Banks, USTelecom senior vice president-law and policy. USTelecom’s petition is the latest in a string of petitions by telecom companies and associations to encourage the commission to examine issues related to the technological changes happening in the industry, Banks told us. USTelecom’s petition to rethink how to approach the voice market and AT&T’s petition examining the transition from PSTN to all-IP networks (CD Nov 10 p11) are “all driven by the same thing,” he said: “Technological change. The growth of wireless, cable getting into voice, IP technologies. All of these things are driven by the fact that technology’s changed a lot, and it makes the way the commission thinks about regulating old-fashioned."

When dominant carrier regulations are applied to non-dominant carriers, it harms competition, a fact the commission acknowledges “every time [FCC chairman Julius] Genachowski gives a speech about getting regulation right,” Banks said. In its petition, USTelecom pointed to the FCC’s recent order eliminating the presumption against exclusive arrangements for vertically owned cable programming. The commission’s actions there were based on a finding that the cable industry’s market share had fallen from 67 to 57 percent in five years, USTelecom said, citing the order. The commission concluded a case-by-case approach could adequately address harmful conduct in a “more targeted, less burdensome” manner. The commission can make the same kind of pronouncement in the ILEC context, Banks told us. “Cable has a much higher share than telcos do in voice."

The Independent Telephone and Telecommunications Alliance, which represents mid-size ILECs, supports “rules that accurately reflect today’s competitive environment,” said President Genny Morelli, who said the petition should be “carefully considered” as quickly as possible. “Incumbent wireline carriers are no longer dominant providers of switched access services and the rules should reflect that indisputable fact,” she said. Updating the rules will lead to lower rates and enhanced service options for customers, she said.

"It’s time for our nation’s voice services regulatory regime to catch up with the dramatic changes that have shaped the communications landscape in recent times,” said Frank Simone, AT&T assistant vice president-federal regulatory (http://xrl.us/bn6783). Simone questioned the “usefulness of a regulatory environment designed for a 1970s marketplace.” The relief requested by USTelecom is a small but essential step toward regulatory modernization, said Fred Campbell, director of the Communications Liberty and Innovation Project at the Competitive Enterprise Institute (http://xrl.us/bn68bm). The petition has a “very limited scope” compared to the FCC’s Technology Transitions Task Force, dealing only with unique regulatory requirements on pricing, tariff filings and market entry and exit that don’t apply to their competitors, he said. Bruce Mehlman of the Internet Innovation Alliance told us the petition was “directionally” important, one of many steps the commission needs to take to eliminate nonsensical rules designed for a different era. “It’s not the only anachronistic regulation from a monopoly era that no longer fits a hypercompetitive digital environment,” he said.

Not everyone was as enthusiastic about the proposed changes. John Bergmayer, senior staff attorney at Public Knowledge, cautioned that the CLECs would be “toast” if ILECs saw deregulation. “We have a lot of regulatory systems that have enabled some level of competition. They're far from perfect. When they're somewhat successful in enabling competition, that’s not a reason to get rid of them. Sometimes they're necessary to preserve the competition that we currently have,” he told us. Some of the rules USTelecom seeks to get rid of “actually do serve a purpose of allowing there to be some competitive choices for consumers.” Willkie Farr attorney Thomas Jones, who represents CLECs, said the commission should focus on updating competition policies for a packet-mode world. “Competition will benefit the economy and consumers far more than adjustments to the rules discussed in USTelecom’s petition,” he said.