Relief from Legacy Rules Would Free Telcos to Compete with Cable on High-Speed Broadband, USTelecom Says

USTelecom Chairman Steve Davis, executive vice president at CenturyLink, said his company has already deployed gigabit-speed fiber service in 16 cities, but would like to do more. “We know what customers want,” Davis said on a call with reporters. “They want investment in tomorrow’s services, not investment in yesterday’s services.” But Davis said most investments by ILECs still go to maintaining legacy networks, not broadband.

"Competition today is occurring at the high-speed broadband level,” Davis said. “Customers demand today high-speed broadband services. It doesn’t matter whether you're talking about consumers or the largest businesses.”

USTelecom President Walter McCormick said the group is responding directly to a speech FCC Chairman Tom Wheeler gave Sept. 4 (http://fcc.us/1u4u3Ws) at 1776, a startup incubator firm, questioning why there’s little “meaningful competition” in wired high-speed broadband. ILECs are “well positioned to give cable a run for its money, offering consumers greater choice,” McCormick said on the media call.

"We have every reason to believe that the commission will view this as a very positive contribution to its agenda,” McCormick said. USTelecom and its members have discussed the importance of getting rid of some legacy regulations since the release of the National Broadband Plan in March 2010, he said. Under Wheeler, “we have had an acceleration” of the focus “on trying to encourage greater competition where it can exist,” he said.

"The relief requested will promote the deployment of next-generation high-speed networks and fulfill the Commission’s core goals of expanding infrastructure investment and increasing competition for services that have become central to Americans’ daily lives,” USTelecom said in the petition (http://bit.ly/1CPitBR). ILECs face unique requirements, the group said. “While cable, wireless, and competitive fiber providers are free to focus their expenditures on next-generation networks suited to delivering higher-speed services, ILECs must direct a substantial portion of their expenditures to maintaining legacy networks and fulfilling regulatory mandates whose costs far exceed any benefits."

The petition targeted “outdated provisions” in Telecom Act sections 271 and 272 and related equal access rules; rule 64.1903 structural separation requirements; a requirement that ILECs provide an unbundled 64 kbps voice channel where they've replaced a copper loop with fiber; Section 214(e)(1) eligible telecom carriers requirements in cases where a price-cap carrier doesn’t receive high-cost USF support; the remaining Computer Inquiry rules; requirements that ILECs share new entrance conduit; and rules that prohibit the use of contract tariffs to offer special access and high-capacity data services in the absence of pricing flexibility. The petition offers the FCC “a concrete agenda for allowing ILEC investment to be reoriented away from legacy, narrowband, copper-based telephone networks and toward the deployment of next-generation facilities,” USTelecom said.

Many of the rules are of the type where “most people in the U.S. would say, ‘Really, that’s still a regulation?'” Davis said. In February 2012, USTelecom filed for forbearance on 17 different categories of rules. A year later, the FCC acted on three of the categories in an order (http://bit.ly/1s5l1Zl).

The latest petition is much broader than the 2012 petition, seeking forbearance from Title II and Computer Inquiry burdens in four service markets -- voice, long distance, commercial broadband and residential broadband -- said Berin Szoka, president of TechFreedom. USTelecom makes “a strong case for leveling the competitive playing field so that telcos can focus on competing with cable, such as by upgrading to VDSL2 and by pushing fiber deeper into their networks,” Szoka told us.

The timing of the petition may be a “political masterstroke,” Szoka said. “Thus far, those pushing for Title II have blithely assured everyone that forbearance can solve all the problems raised by Title II,” he said. “First, this petition calls attention to the commission’s refusal last year to grant forbearance, despite all its talk about needing a stronger competitor for cable. Second, the petition may force those activist groups shouting about Title II but promising forbearance to get specific about what kind of test they think should apply to forbearance decisions and just how far they're willing to go in peeling back the burdens of Title II if the FCC imposes it on broadband more generally. They can’t consistently both oppose this petition and argue for Title-II-with-forbearance.”

The petition doesn’t offer specifics on how the FCC’s analysis should work, Szoka said. “That’s smart, because to grant the petition, the FCC would have to walk back from the analysis it applied in its denial of Qwest’s Phoenix forbearance order.” Ultimately, the FCC must “change its approach” before granting this or any other similar forbearance petition, Szoka said. “Some Title II advocates may claim that granting forbearance to USTelecom may demonstrate that the FCC has the discretion to tailor its forbearance analysis to changing circumstances,” he said. “That’s not so clear. The FCC may get discretion to change its approach, but it can’t see-saw willy-nilly in its methodology without being declared ‘arbitrary and capricious.'”

Free Press agrees with Wheeler’s statements that the rights of network users don’t change just because the technologies that power networks change, said Policy Director Matt Wood. “The FCC can shape Title II, and has done so successfully for decades now, to fit newer services in relatively competitive and deregulated markets,” Wood said. “But network operators can’t discriminate, degrade and discontinue service at will, all in the name of false trade-offs and deployment promises. Forbearance requests are a key part of Title II, but the law also requires the FCC to keep the core principles and outcomes at the heart of our telecommunications networks intact.”

"It’s discouraging that the commission hasn’t acted sooner to get rid of the legacy rules USTelecom identifies because it is clear that, in the main, they cause the ILECs to incur costs that exceed any consumer benefits,” said Free State Foundation President Randolph May. “Until money starts growing on trees, the ILECs’ resources always will be limited, and consumer welfare will be enhanced if the limited resources are invested in building out and upgrading broadband facilities. In line with well-known bureaucratic imperatives, the commission finds it very hard to let go of outdated regulatory rules.”