FCC Teleco Ruling

We mentioned last week that FCC Chairman Powell’s deregulatory agenda was in jeopardy, largely due to the efforts of fellow-Republican and Bush insider Kevin Martin. This has come to pass:

With Republican FCC commissioner Kevin Martin staging a palace coup on Thursday and joining with Democrats on a key vote, agency chairman Michael Powell can no longer necessarily count on a Republican majority when deciding the fate of key media ownership rules.

Thursday’s action by the Federal Communications Commission concerned the rewriting of telephony regulations. In recent days, Martin went against Powell and began circulating a competing proposal that did not go as far as Powell’s plan did in deregulating the phone industry.

Martin — who has strong ties to the White House — convinced Democratic commissioners Jonathan Adelstein and Michael Copps to vote with him and shoot down Powell’s plan. Martin, who worked on President Bush’s transition team, is sure to have vetted his plan with the Bush administration.

It is unusual for a FCC chair to lose out on a key vote. “This is hard evidence that he is willing to buck the chairman,” one insider said.

Powell was clearly furious, saying that portions of Martin’s blueprint were filled with egregious legal errors and just plain bad for business. He said some of these “compromise some important principles to which I adhere unwaveringly.”

Long labeled a deregulator, Powell has insisted that he hasn’t made up his mind regarding the media ownership rules now under review at the FCC. The commission is expected to vote in late spring.

Martin’s so-called revolt drew harsh words on Capitol Hill, where lawmakers such as Rep. W.J. “Billy” Tauzin (R-La.) have long advocated deregulation of the media and telecom industries.

Issuing a blistering statement, Tauzin said Martin is a “renegade Republican” and a “pro-regulatory soulmate” of the Democrats.

“Clearly, this marks a low point for the FCC. Despite chairman Powell’s best efforts, and those of (Republican) commissioner Kathleen Abernathy, regulatory reform has been stabbed in the back. A palace coup led by Kevin Martin has breathed new life into the dying era of big government control over U.S. telecommunications policy,” Tauzin said.

The vote was as key to the telecom sector as the media ownership rules are to the TV industry.

Martin’s plan upholds rules that require local phone companies — namely, the Baby Bells — to share their systems with rivals at a substantial discount, but gives individual states new authority to relax the requirement.

Powell, along with giant telecoms such as Verizon, wanted the rule wiped clean from the books and fiercely objected to giving states purview.

Martin said individual states are in a better position to decide the fate of a particular market.

“I support this item because it achieves a principled, balanced approach. It ensures that we have competition and deregulation,” Martin said.

The commission also took a vote on regulations governing high-speed Internet service, with the three Republicans agreeing to ease regulations forcing providers to share the lines with competitors. [Variety]

More on the details of the ruling:

The nation’s phone giants moaned that the FCC failed to drop outdated rules that let competitors use Bell networks at discounted prices. Consumer groups praised the decision because it preserves the ability of long-distance carriers like AT&T Corp. and WorldCom Inc. to offer local service.

But consumer groups also complained that the phone companies won dangerous power over the future of Internet access, closing out smaller providers and guaranteeing higher prices for residential users.

….The FCC was faced with an extraordinarily complex task — to reconsider, by a court-ordered deadline, its enforcement of the 1996 Telecommunications Act. Two earlier sets of rules had been rejected by federal judges.

One major ruling Thursday was that state regulators will decide where, and at what price, Bells must make parts of their networks available to rivals in order to ensure competition.

….The FCC did free the Bells from having to make new high-speed fiber-optic lines available to competitors at regulated prices. The Bells had long sought this bit of deregulation, saying it was vital for them to compete better with cable modems and get broadband to more homes.

“Their bluff was called,” said Joan Marsh, AT&T’s director of federal government affairs. “It’s time for them to put their money where their mouth has been for a number of years.”

Phone company executives countered that because the FCC didn’t do enough to keep their basic landline phone business from shrinking, they won’t have the money to invest in new fiber networks.

Still, some analysts said the Bells were given an enormous opportunity to confirm their lock on the “last mile” of wiring to individual homes. Indeed, Covad Communications Co., which leases Bell lines to provide DSL high-speed access, said it might abandon selling to consumers and concentrate only on businesses. [AP]