DC Circuit Disconnects Incompas, CPUC Forbearance Challenges
With the greatly diminished voice transmission market power of ILECs, their possession of copper loops is hardly meaningful, so the FCC sensibly ended the requirement they provide copper wire services to competitors at subsidized pricing. That's per the U.S. Court of Appeals for the D.C. Circuit Tuesday as it rejected Incompas and California Public Utilities Commission challenges to a 2019 forbearance order (see 2003260040).
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
ILECs increasingly "look more like the sick men of the voice transmission market," said Judges Sri Srinivasan, David Tatel and Laurence Silberman in a docket 19-1164 opinion penned by Silberman. They said it's "myopic" to focus on ILEC copper loops as giving them meaningful market power in the voice market nationally. Some geographic locations lack meaningful competition, but the FCC "was quite reasonable" to look at the national market instead of at the market power in every locality, the judges said. They said petitioner arguments about rural areas "were insignificant." Jurists said it's "hardly ... surprising" the order used different findings and modes of analysis than past orders, given changes in voice services' market and technologies.
Forbearance from the wholesale requirement probably will mean CLECs paying higher prices for TDM voice service over copper loops, the D.C. Circuit said. That, plus the declining importance of copper loops, means CLECs will have incentives to invest in more advanced facilities, which will benefit consumers, it said. The court is "a good deal more dubious" about FCC claims that forbearance would incentivize ILECs to update their facilities. "This bit of confusing language might have suggested a remand," except a footnote in the order that seems to clarify what the agency was saying "as careless wording," it said.
"The votes are in, and it's unanimous," tweeted FCC General Counsel Tom Johnson. "The D.C. Circuit has rejected challenges to our reforms of rules that imposed requirements on legacy telecom services that are no longer needed in light of increased competition." The unanimous decision "will promote investments in next-generation networks that better serve consumers," Chairman Ajit Pai tweeted.
USTelecom, which petitioned in 2018 for ILEC unbundling forbearance relief (see 1805040016), emailed that the decision "confirms that the FCC has taken the right approach to modernize its regulations to make sure they reflect the current realities of today’s ultra-competitive broadband marketplace.”
CPUC arguments largely followed Incompas', the court said. Judges singled out one novel CPUC claim -- that without an unbundling requirement on ILECs, 911 calls could be jeopardized during a power outage. They said the order not directly addressing that claim "is a troubling problem" for the FCC and also could have required a remand. However, the CPUC largely conceded in oral argument that the order wouldn't reduce the availability of line-powered TDM copper, so a remand was deemed unnecessary. The CPUC didn't comment.
Incompas is "obviously disappointed," emailed General Counsel Angie Kronenberg. The court acknowledges parts of the FCC’s forbearance order suggested a remand, but the court ultimately "gave the agency a pass," she said. “In fact, the FCC reversed course without explanation on its past treatment of avoided cost resale. Unfortunately, as we argued, and the decision also acknowledges, government and business customers who rely on traditional TDM phone service should now expect to pay higher prices for it," she said. “As the pandemic ravages small business customers who are struggling to survive, words matter, price hikes matter and competition matters now more than ever.”
The FCC emailed it's "pleased that the D.C. Circuit has agreed that two narrow regulatory obligations imposed on phone companies back in the 1990s no longer stand the test of time. With the sunset of these outdated regulations, we expect carriers of all stripes will focus on deploying the next-generation networks that Americans want and deserve."