Chaos vs. Order

Jon E. Canis
04/01/2001

Posted 04/01/2001

Chaos vs. Order
FCC Faces Choice on Access Charges
By Jon E. Canis

Jonathan E. Canis
Attorney at Law
Kelly Drye &
Warren LLP

As discussed previously in this column, AT&T Corp. (www.att.com) and Sprint Corp. (www.sprint.com) have been withholding payments of access charges from CLECs, arguing that the CLECs' rates are excessive. To date, more than 16 CLECs are suing AT&T and/or Sprint in federal district courts, and more such suits will be filed imminently.

This dispute has spilled over to the FCC. Two federal judges have referred two issues to the FCC (www.fcc.gov) for resolution: 1) are CLEC access charges reasonable, and 2) can IXCs and/or CLECs block originating and/or terminating traffic? As a result, the FCC now has pending three formal complaints, one rulemaking proceeding, and 16 rate complaints, all dealing with IXC/CLEC disputes over access charges.

Moreover, the FCC faces brutal deadlines for these pending actions. One referring judge stated that, if the FCC does not decide the blocking issues by July 19, 2001, he will take the issue back and decide it himself. Furthermore, the Communications Act requires that rate cases be resolved within five months. The parties involved agreed that the FCC will handle one of the rate cases within that deadline, and hold the other 15 in queue.

This presents the FCC with an enormous challenge and an enormous opportunity. The FCC is now at a crossroads where it must decide between two courses of action to resolve the IXC/CLEC dispute over access charges. Does it:

1) Establish some means of regulating CLEC rates, and ensure payment as a means of resolving the dispute? or

2) Allow carriers that can't agree on access rates to refuse to carry each other's traffic?

This is nothing less than a choice between chaos and order--if the FCC takes the rate regulation path, it follows decades of precedent that have led to a seamlessly interconnected, ubiquitous public switched network. If it takes the blocking path, it opens a Pandora's box of uncompleted calls, confused and irate customers, and discriminatory access deals that benefit a few large IXCs and gouge the little ones.

ALTS (www.alts.org)--the CLEC trade association--has asked the FCC to establish a minimally intrusive form of CLEC rate regulation called Guaranteed Reduced Exchange Access Tariffs (GREAT). The GREAT Proposal would set a limit of 2.5 cents (higher if a CLEC demonstrates that it serves higher-cost rural areas), and guarantees the right of CLECs to collect their tariffed rates. If the FCC chooses this path:

The federal court litigation goes away--or at least is handled by the courts and is not referred to the FCC;
The FCC does not have to hear an endless succession of rate complaints, and does not have to actively regulate CLEC access charges; and
Most importantly, IXCs and CLECs will not resort to traffic blocking as a means of resolving rate disputes.

Down the other path--reliance on blocking to resolve disputes--lies chaos. We should see which path the FCC chooses by July 19.

Jonathan E. Canis writes a monthly column on regulatory issues. He is an attorney at law with Kelley Drye & Warren LLP, and can be reached at canis@kelleydrye.com.

It's becoming increasingly clear that the Telecom Act is in a race for its life. Several members of Congress, as well as FCC (www.fcc.gov) Chairman Michael K. Powell, would like to see more deregulation in the telecom industry. This could mean revisiting the Telecom Act in order to make that happen. The FCC, Powell said, must take a more "quasi-legislative" approach to regulation, becoming more cautious about dealing with the so-called Digital Divide, and on imposing conditions on mergers. He also said that as the federal agency tries to keep pace with an industry that's operating on "Internet time," the FCC will be "restructured to optimize efficiency," working faster with fewer resources. The object, Powell added, is to take a coherent approach to local competition, of which deregulation is just a part.

Ernest B. Kelly III, president of the Association of Communications Enterprises (ASCENT, www.ascent.org), predicts that the RBOCs--having failed over the past five years in the markets, the regulatory arenas, and the courts in their efforts to keep the markets closed--will redouble their efforts in Congress to stifle competition however they can. "No doubt they will have allies in this effort, and those who believe in the promise of the '96 Act are in for a long siege," Kelly said. "We are confident, in the end, [that] the Congress will not undo what took 17 years to achieve, namely, a mechanism to open up the last phone monopoly--local service--to competition."

Verizon Communications Inc. (www.verizon.com) is in the final stages of review of its application to offer long-distance service in Massachusetts. The FCC should complete its review by the end of April. Verizon then expects to file the remaining applications in 11 other states by mid-2002.

Members of the Competitive Telecommunications Association (CompTel, www.comptel.org) vowed to "break the bottleneck," which is the Bell companies' stranglehold over local market access. In a letter sent to all 535 members of Congress supporting the procompetition tenets of the 1996 Telecom Act, CompTel president H. Russell Frisby Jr. calls 2001 a critical year. "We face the very real possibility that the Bell companies could remonopolize the industry," he said.

While local competition is increasing, the anticompetitive business practices of the RBOCs remain a major impediment to competition, and CLECs and ISPs still face an uphill battle, said four CEO representatives of the CLEC and ISP industries during a recent CompTel meeting. Chief executives from Grande Communications (www.grandecom.com), IP Communications Inc. (www.ip.net), Internet Communications Corp. (www.incc.net), and Network Innovations Inc. (www.nii.net) noted that all market entry methods--interconnection, resale and UNEs--are being delayed by a lack of FCC enforcement.

Looking Glass Networks Inc. (www.lglass.net) received franchise approval from New York to build telecommunications networks in the New York metro area. The approval allows Looking Glass to bring in high-speed and large-capacity data transport to metro customers. Looking Glass also received the following 12 state regulatory approvals: California, Colorado, Florida, Indiana, Maryland, Michigan, Minnesota, Missouri, Ohio, Oregon, Virginia and Washington. The additional approvals authorize the company to operate as a public utility and to offer facilities-based telecom services. This brings the total number of approvals to 19, with three other final state approvals near completion.

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