August 22, 2003, 8:55 AM — The U.S. Federal Communications Commission (FCC) has released a long-awaited final order governing the competition among telephone and Internet service providers, but legal challenges almost certainly are on the way.
"Parties who do not believe they got everything they wanted out of an FCC order frequently go to court, and I don't think this order is going to be any exception," said an FCC staffer who spoke on condition of anonymity in a conference call after the order was released late Thursday. "In terms of the defensibility of the order, I think the staff has acquitted themselves magnificently in writing an order that ... will stand up to judicial scrutiny."
The 576-page order is designed to set the rules on what parts of their networks the four large regional Bells must share with competitors at discounted prices. Thursday's order largely added details to a decision commissioners made Feb. 20, when the FCC voted to allow the four regional Bells to refuse to share new fiber-based broadband networks with competitors.
FCC Chairman Michael Powell, who was outvoted 3-2 in the commission's February decision, cheered the final order for allowing the regional Bells to stop offering discounted line-sharing services to competing Internet service providers offering DSL (digital subscriber line) service to residential customers. That decision will allow the Bells to invest in new broadband Internet services, he said in a statement, including fiber to homes.
However, Powell criticized the commission's decision to allow state public service commissions to set the discounts that the regional Bells must offer for their switching facilities. Powell said the decision preserves FCC rules that have twice failed in court challenges since the Telecommunications Act of 1996 was passed by the U.S. Congress.
"The majority's switching decision is bad law, bad policy, and ultimately bad for consumers," Powell wrote in his statement about the order. "After one sorts through the legal contortions of the majority's switching decision he will find an order remarkably similar to the prior two fatal decisions -- one that preserves (network sharing) as the favored mode of competition ... This is bad policy and bad law."
Backers of the Bells argue they shouldn't have to prop up their competition by offering parts of their phone networks at discounted prices. The Bells argue that competitors should have to build their own networks or pay full price to use the Bells' equipment. Competitors such as AT&T Corp. and MCI argue, however, that without the discounts on the Bells' so-called unbundled network elements (UNEs), the competition would dry up and the Bells would gain regional monopolies on phone and phone-line-based Internet services.