Hung Up

New Congress Unlikely to Push Telecom Agenda Forward

With a new House speaker in power — Nancy Pelosi, D-Calif.— Republicans can expect a harder time passing telecom legislation that’s overwhelmingly favorable to the Bells.

With the Democrats in control of Congress after 12 years of Republican rule, lawmakers are tackling all manner of issues anew. But a rewrite of the Telecom Act, which Republicans took a stab at last year, is far down the list. This leads industry watchers to surmise that while some small-scale action could come out of the House or Senate, the real regulatory action this year is most likely to come from the FCC rather than Congress.

“I’m very skeptical that the next Congress will enact broad legislation addressing as many issues as were under consideration in the last Congress,” says Carol Mattey, the national leader in the U.S. technology, media and telecommunications regulatory consulting services practice for Deloitte & Touche LLP and a former FCC staffer. “I think it’s more likely that they may take up certain discrete issues that they can achieve consensus on, but the issues that proved to be problematic in the last Congress are going to be equally problematic — if not more so — in the next Congress.”

Among the less-touchy topics, write Blair Levin, Rebecca Arbogast and David Kaut, analysts of Stifel, Nicolaus & Co. Inc., in a memo to clients, are broadcast multicast must-carry rights, cable down-conversion rights, digital converter-box subsidies/vouchers, and the FCC’s planned auction of returned broadcast spectrum in the 700MHz band. “There are even some uncertainties about whether the February 2009 broadcaster deadline for turning off analog signals will stick, particularly if it looks like millions of TV sets could go dark,” they add.

Industry watchers say FCC Chairman Kevin Martin likely will have to spend more time testifying before Congress in 2007, justifying his agency’s activities and decisions over the past couple of years.

Contentious topics include, of course, net neutrality. Even with Democrats in charge, however, the debate is unlikely to be pushed forward, says Mattey. Because net neutrality is such a “slickery concept,” she explains, it is unlikely the 110th Congress would make much more headway on definitions, implications or consequences than its predecessor. “Whether a member is Republican or Democrat, I think it’s very hard for people to get their arms around what it actually means because people use it as a sound bite, and then when you dig beneath the surface, you discover that people are talking about different concepts. That’s not a partisan thing, per se, it’s just that people are approaching it from different philosophical perspectives.”

In terms of telcos’ television rollouts, industry watchers say video franchise reform will continue to come from the states, especially since Verizon Communications Inc. vowed last year it would not continue to pursue federal legislation on the matter if a bill on nationwide franchises did not pass in the 109th Congress. “If you don’t have a major proponent pushing for it, it’s not going to happen,” says Mattey.

The analysts at Stifel Nicolaus agree the Bells will keep lobbying for new rules from the FCC, and state and local authorities. They note some RBOCs have even “taken some localities to court over alleged obstructionism and pursued other litigation to gain relief.”

At the FCC, telecom insiders expect Chairman Kevin J. Martin to continue working to reform intercarrier compensation and Universal Service Fund contribution methods, although, given the enormity of those matters, change is expected to be glacially slow. One front where action could come quickly, however, pertains to consumers’ proprietary information, says Mattey. She says the FCC is likely to tighten existing rules after last year’s uproar over businesses and individuals being able to access phone records, and the implications for identity theft.

The FCC itself also could be under more Congressional scrutiny, analysts say. Indeed, at press time, reports were circulating that Martin was expected to have to testify before various House and Senate committees in 2007 in defense of his agency’s policies. Martin likely will be under the microscope for his swift approval of Bell megamergers as well as money appropriated to the FCC, and the strings attached to that money, analysts say. On the whole, Mattey muses, “I think 2007 is going to be a year in which there’s a lot of dialogue and discussion on key issues, but less resolution of those issues.”

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