Telecom firms push FCC for broadband deregulation

FCC Agenda Includes 'Forbearance,' Access

by David Hatch, National Journal

Dominant telecommunications carriers are lining up to seek regulatory relief from the Republican-controlled FCC, moves that will test the agency's ability to deregulate while under the watchful eye of congressional Democrats.

AT&T, Embarq, Frontier and Qwest Communications International are seeking exemptions from price caps governing their provision of high-capacity, high-speed Internet access to businesses.

They filed "forbearance" requests after the FCC granted similar relief to Verizon Communications last year. But Verizon prevailed on a technicality after inaction due to a stalemate resulted in its proposal being granted. On Sept. 11, Qwest withdrew its petition because it lacked the votes for passage, but the company refiled it the next day.

"The Bells generally want to get rid of as much regulation as possible," said David Kaut, a telecom analyst at the investment firm Stifel Nicolaus. It views FCC Commissioner Robert McDowell, a Republican, as the swing vote in these matters. FCC Chairman Kevin Martin and Commissioner Deborah Taylor Tate, also Republicans, support deregulation, but Democratic Commissioners Jonathan Adelstein and Michael Copps oppose it.

The FCC must act on AT&T's petition by Oct. 11 but also might decide on other requests that day, sources said.

Meanwhile, in six markets, Verizon is seeking to remove federal regulations that grant competitors access to its networks at heavily discounted rates. The company says there is sufficient competition to justify the change, but carriers such as XO Communications that rely on discounted rates disagree.

On Wednesday, XO and its allies held a briefing to reiterate their concerns and urge the FCC to adopt a more transparent process for reviewing forbearance requests. In an interview, XO spokesman Jim Crawford accused Verizon of inflating data on XO's presence in Boston and New York, cities where Verizon seeks relief. "They're making up the numbers," he said.

Verizon spokesman David Fish said the criticism is "another attempt to deflect attention" from the fact that XO and other small carriers have failed to give the FCC comprehensive data about their market presence.

In 2005, the FCC eased similar regulations for Qwest in Omaha, Neb., but the move was not implemented until this spring due to court challenges. Smaller competitors say Qwest hiked its prices, but Qwest said its fees rose to market rates. It is seeking to expand the deregulation to four other metro areas.

A storm also is brewing over efforts by some wireless carriers and smaller phone providers to persuade the FCC to re-regulate markets it previously deregulated. At issue is "special access," the reduced rates that dominant firms offer competitors for telecom network capacity. Critics say rates are rising too fast where regulation was lifted.

AT&T, Embarq, Qwest, Verizon and their supporters counter that the FCC and independent analysts consider the special-access sector to be competitive. Brian Adkins, director of federal legislative affairs at Embarq, said his company would lose hundreds of millions of dollars if it is subject to re-regulation.

The FCC, under pressure from House Democrats to act, could issue a decision within weeks.

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