Verizon, Incumbents Push Back Against CLECs on Title II Forbearance Debate

The dispute goes back to 2004, when Verizon asked the FCC for forbearance “from (1) general Title II economic requirements that apply to non-dominant common carriers or local exchange carriers ... (2) Title II public policy requirements that apply generally to all telecommunications carriers ... (3) the Bell Operating Company (BOC)-specific Computer Inquiry requirements to the extent that they impose the same transmission access and nondiscrimination requirements that apply to all non-BOC, facilities-based wireline carriers in their provision of enhanced services,” according to the Nov. 10 public notice that led to Tuesday’s comments.

After the FCC passed the statutory deadline for dealing with the forbearance petition, it automatically was granted (CD March 21/06 p1). Several ILECs -- derisively called “'me too’ petitioners” by CompTel -- filed forbearance petitions of their own, most of which were granted in part. In November, tw telecom, BT Americas, the Ad Hoc Telecommunications Users Committee, the Computer and Communications Industry Association, EarthLink and Sprint all signed a new petition, asking the FCC to reverse the forbearance grants. “This change is necessary to ensure that the Commission is able to carry out its responsibility to implement the economic and public policy requirements of Title II of the Communications Act and to level the playing field in the marketplace for services such as Ethernet, ATM and SONET that comprise the core of the nation’s communications infrastructure,” the petitioners said (http://xrl.us/bmmksk). A similar coalition is behind recent challenges to the FCC on special access reform (CD Dec 8 p6).

FCC action is overdue and desperately needed, the CLECs said. “The forbearance granted to Verizon by operation of law in 2006 sets Verizon apart from every other incumbent and competitive local exchange carrier ... in the country, including those ILECs that sought similar forbearance from Title II regulation in 2006-2008,” MegaPath and U.S. TelePacific said in their joint comments (http://xrl.us/bmmkdg). “The Commission should swiftly correct this regulatory anomaly in which Verizon is subject to less regulation than its competitors with much smaller market shares. Verizon’s vastly overbroad forbearance ... hinders competition and consumer choice.” In any case, MegaPath and U.S. TelePacific added, the “FCC has already determined that Verizon’s obligations under Title II for the non-TDM-based services covered by its petition should be placed on par with those of AT&T, Embarq, Frontier and legacy Qwest. The only remaining task is for the Commission to issue an order to finalize that decision.”

Delay has created chaos in the market, CompTel said. “The Commission’s inaction has resulted in the very consequences the Commission claimed that it sought to avoid ... and has maximized, rather than minimized, the time in which Verizon has been allowed to enjoy its favored status as a provider of packet switched broadband and optical transmission services free of the regulation to which all other similarly situated competitors are subject,” CompTel said (http://xrl.us/bmmkdz).

But repealing the forbearances would violate Section 10 of the Communications Act, CenturyLink said. “There is no permission specified within the statute to allow reversing or modifying a forbearance grant,” CenturyLink said (http://xrl.us/bmmkdx). “Because the statutory time period has expired, the Commission has no authority, more than seven years after the filing of the Verizon Petition, to modify or curtail the original grant nor to reassess the forbearance criteria specified in the statute for Verizon’s requested forbearance.” Furthermore, CenturyLink and Verizon said in separate filings, the Administrative Procedure Act forbids the FCC from imposing new regulations without going through a rulemaking. “At base, the Petition [of tw telecom, et al.] can at most be considered only a petition for rulemaking,” CenturyLink said.

Reversing the forbearance grants also would actually create chaos, not end it, several of the incumbents said. The original “forbearance grant permitted the Verizon companies to enter into contracts with customers to provide forborne services on an unregulated basis,” Hawaiian Telcom said (http://xrl.us/bmmkdn). “Verizon operating company customers of these forborne services now have an expectation that these contracts are legal, subject only to the general contract law. It would be markedly anti-consumer to now open these contracts to new and different challenges, possibly leading to price increases and other changes in negotiated terms and conditions, particularly when the market is competitive.”

The market is already competitive, Verizon said in its comments. “Numerous providers -- including Petitioners here -- are thriving in this innovative and rapidly growing marketplace,” Verizon said (http://xrl.us/bmmkdg). “For example, lead Petitioner tw telecom is ranked third in the United States in the provision of business Ethernet service, which has recently overtaken legacy services in total bandwidth sold. Petitioner Sprint recently announced an award of contracts to dozens of companies for building fiber-based backhaul capable of delivering Ethernet at 15,000 of its cell sites after a highly competitive bidding process; Sprint expects to announce another set of contracts for fiber backhaul at 15,000 more sites in mid-2012.”