SBC Can't Get IP Services Off The Common-Carrier Hook

SBC Communications has been unable to convince the FCC that Internet Protocol (IP) platform services should be free from common carrier regulation - in large part because a favorable commission ruling on such a request could have stirred up a hornet's nest on unregulated services and competitive access obligations of incumbent local exchange carriers (ILECs). In last week's denial of SBC's forbearance petition - first filed in February 2004 - the commission indicated the application's vague and broad nature essentially made it "procedurally defective" for legal, and not regulatory policy reasons. The FCC could not find its way to even grant what SBC called a "modest additional step" intended to accompany a larger FCC decision characterize IP-enabled services as information services.

SBC's petition sought to remove IP services and enforcement from the rules and regulations applicable to telcos under Title II of the Communications Act of 1934 and, instead, impose FCC authority under Title I on the less- regulated information services.

In its decision, the FCC pointed out it has not yet decided the extent to which IP-enabled services are covered by Title II and its implementing rules, and that the language of SBC's request was "too undefinitive" about the statutory provisions and regulations that "may or may not" apply to the telecom carrier or telecom service at issue. "In addition, the evidence and arguments set out in SBC's petition and subsequent pleadings are insufficiently specific to permit a finding that forbearance is appropriate," the FCC said.

According to the regulator, SBC conceded the commission's Title I authority could impose whatever the FCC reasonably felt would be needed to achieve such important public policy objectives as the universal service fund (USF), public safety/E911, law-enforcement communications assistance and disability access. The petition did not cover "legacy" facilities currently regulated under Title II (yet Iowa consumer advocate John Perkins has warned ILECs might claim their use of IP on older networks also can avoid state common carriers regulation; see congressional story in this issue of TPR).

Assessments by the commissioners suggest there certainly is long-term interest in pursuing the broad issues raised by SBC - in the interest of promoting investment in broadband facilities and legacy networks. Still, SBC's stand-alone filing for a ruling was somewhat premature and could lead to problems with previous FCC rulings on competitive carrier non-discriminatory access to ILEC facilities.

Stemming 'Re-Monopolization' Efforts

This is the second adverse ruling the former Bell companies have seen in about two weeks. Most recently (TPR, May 2), the FCC rejected SBC and BellSouth petitions to change some of its rules requiring ILECs to provide subscriber list information (SLI) to directory assistance (DA) competitors on a non- discriminatory basis; the two had asked the regulator for additional restrictions and modifications on how DA rivals may use SLI or allow the ILECs negotiate their own contract terms and restrictions with DA rivals.

Nevertheless, the SLI/DA matter was not as sweeping as SBC's recent IP request or the earlier case of AT&T (TPR, March 2), which was admonished by the FCC for avoiding USF contributions and intrastate access charges on the FCC- rejected premise that prepaid long-distance calling-card services (with advertisement insertions) transformed such offerings into unregulated information services.

Meanwhile, speculation suggests that, despite the SBC petition's lack of focus, the ILEC may have been hoping the FCC would pave the way for supporting lighter regulation of future IP services, including video, as well as eliminating franchising requirements for such offerings. Factors in preventing any sweeping FCC decision at this time, however, may have included congressional interest in rewriting telecom laws to address IP offerings as well as court disputes surrounding information services, such as the Supreme Court's consideration of the Brand X Services cable-modem case.

The CompTel/ALTS competitive carrier trade group called the SBC petition a "transparent attempt" to recapture its local phone monopoly and linked the request to the ILEC-interexchange carrier (IXC) mergers as examples of Bell "re- monopolization efforts;" it welcomed the FCC action as insurance that ILECs cannot continue to "re-monopolize the local telecom market" by shutting off their networks to competitors.

"Over the past year, the Bells have successfully implemented a regulatory agenda that cuts off competitive access to bottleneck local facilities. But this action rekindles hope that the era of monopoly control of the regulatory process is coming to an end," the group says. "Had the FCC granted this petition, SBC and the other Bells could have shut off their networks to all competing ISPs and VoIP providers...This would have been particularly destructive at a time when SBC and Verizon are assimilating their largest competitors in an effort to reconstitute the old Bell monopoly. The rejection of this petition bodes well for the new FCC's stronger pro-competitive stance."

[Copyright 2005 Access Intelligence, LLC. All rights reserved.]

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