Story by Charlotte Wolter
The last-minute unanimous vote on Dec. 4 by the Federal Communications Commission (FCC) to deny a petition by Verizon Communications for forbearance in several northeastern United States belies the deep conflicts in the regulatory body that led up to the decision.
The unanimous vote came after nearly two weeks of wrangling at the FCC, touched off by an effort by Chairman Kevin Martin to limit the size of the cable industry, specifically Comcast. The conflict came to a head at a late-November FCC meeting that lasted past midnight in which Martin faced a four to one defeat of his cable proposal.
The late-November cable imbroglio, combined with complaints from competitive carriers about the impending Verizon forbearance petition, attracted the attention of Congress. Martin was called before the House Subcommittee on Telecommunications and asked to explain complaints by other FCC commissioners of a lack of transparency and communication within the regulatory agency.
By the time the Verizon question came before the commission on Dec. 4 after more than a year of delay--the vote on Verizon's forbearance request was taken on the last day before the petition would have been granted by reason of inaction by the FCC. A chorus of congresspersons and competitive service providers was crying "foul." Martin could have been facing another decisive defeat, but instead went with the majority for a unanimous vote.
The Dec. 4 meeting has not quieted the rumblings within the commission, nor the tide of criticism from outside. Martin was required to reply to a letter from Rep. John Dingell, chair of the House Committee on Energy and Commerce, asking him to explain how other commissioners and the public were to be notified of FCC actions well before votes were taken. Dingell also referred the matter to an oversight committee on procedures for further investigation.
And more conflict can be expected when the matter of cable market size and dominance is argued at the upcoming FCC meeting on Dec. 18. Martin reportedly has placed on the agenda a proposal to limit the size of any one cable provider to 30 percent of the total market, roughly equivalent to Comcast's current market share. This time the commission and its chairman are sure to be under the magnifying glass of Congress and consumer watchdog groups.
Also under the microscope are the procedures of the FCC. Some in Congress question the wisdom of allowing important questions, such as forbearance petitions to be decided by inaction on the part of the regulatory agency. There have been suggestions that Congress will seek to revise those rules.
Forbearance
The commission differences erupted over two issues that have to do with competition in telecom services.
First, was Verizon's request for forbearance, that is, relief from the limits placed on what it can charge competitors that want access to it network? Those rates are tightly controlled in an effort to foster competition. If Verizon had not been denied forbearance, the incumbent telco would have been able to raise significantly the fees paid by competitors for access to its network. The end of regulated, cost-based rates could have meant the end of business for these smaller competitors.
Verizon had made the request more than a year ago, and, as the deadline neared, the FCC had not taken action. Failure to take action would have granted the forbearance automatically to Verizon.
While the issue remained in doubt, some competitive carriers, such as Cbeyond, had delayed plans for expansion because of uncertainty over costs. Noting that the delay had lasted 15 months, Cbeyond reported, that the decision "means that (the company) will be able to move forward with its plans to enter markets like Boston, Philadelphia, New York and Pittsburgh over the next several years."
The Cable 70/70 Rule
The so-called 70/70 rule that Martin had evoked as a reason to limit the size of cable operators is a little-known provision of the 1984 Cable Act. Designed to foster competition when cable was the only source of TV programming besides broadcast, it allows the commission to adopt rules limiting cable, if 70 percent of American households can receive cable and if 70 percent of households subscribe to cable.
Today, more than 95 percent of households are passed by cable, and 67 to 69 percent subscribe to a cable video service.
Critics of the chairman's proposals point out that the competitive situation has changed significantly since the original 70/70 rules were adopted. Satellite TV has become a significant competitor to cable, at least for multichannel TV, and the telcos are now entering the multichannel market. Some cable operators have reported losses of subscribers this year, further calling into question why the cable industry would need to be limited at this time.
One result of the conflict over the 70/70 rule, like the forbearance petitions, has been that Congress is re-examining the measure itself and may scrap the 70/70 rule altogether.
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