Foregone Conclusions

Posted: 2/2003

Foregone Conclusions
Litigation Expected Following Triennial Review

By Josh Long

THE FATE OF LOCAL telephone competition may be in the hands of the Federal Communications Commission (FCC), but it's unlikely the government agency will have the final word.

Once the FCC issues an order governing the hotly debated unbundled network element - platform (UNE-P), industry watchers expect appeals to be filed in court.

"As with everything in this industry it is likely litigation will follow whatever determination the FCC makes on this issue," says Adam Thierer, director of telecommunications studies at the Cato Institute. "Regardless of which direction they go, it is highly likely a court battle will follow."

That court battle could be drawn out for years. An appeals court decision could take a year or more, and that decision then could be appealed to the Supreme Court. A Supreme Court decision could take more than a year, if the justices even decided to hear the case, says Genevieve Morelli, a telecom lawyer for Kelley, Drye & Warren and the spokeswoman for the UNE-P-centric Promoting Active Competition Everywhere (PACE) Coalition.

Once the FCC makes its decision, parties could seek to stay the order until a federal appeals court made a ruling. Under the law, plaintiffs must prove there would be "irreparable harm" short of a stay, Morelli says. If an appeals court reversed part of the FCC's order, that order could be sent back to the government agency, she says.

Brad Ramsey, general counsel of the National Association of Regulatory Utility Commissioners (NARUC), says it is likely an appeal would go before the U.S. Court of Appeals for the D.C. Circuit.

"In the best of all possible worlds -- no matter what the order is -- you are looking at two years to two years and six months before the minimum litigation is completed," Ramsey says. "The more specific the order is, I think, the greater the prospect for reversal."

Not everyone is certain litigation is a foregone conclusion. One financial analyst says he thought FCC chairman Michael Powell would attempt to reach a compromise among the Bells and CLECs so he could preserve his legacy and set himself up for his next political position, whatever that may be.

"It's not a foregone conclusion that whatever comes out of the FCC ends up in the courts," the analyst, who spoke on background, says. "He [Powell] can't get elected if all he has to point to is a track record of achieving nothing. He is going to try to come up with something ... that doesn't [fall] too far in favor of the Bells and something that doesn't fall too far in favor of the CLECs."

James Glassman, resident fellow at the American Enterprise Institute for Public Policy Research, says it's not clear where Powell stands.

"It seems to me, Powell has been all over the place on this issue," Glassman says. "He's just added more and more confusion and now the signals he has been sending indicate he may ... be ready to gut the Telecom Act...and that would be a shame."

State regulators across the country are adamant that they should play a continuing role in upholding and setting policies promoting local phone competition. Many states have lowered the wholesale rates, giving the nation's largest long-distance companies incentive for the first time to market local residential phone service.

The states are likely to support an appeal if the FCC severely limited states' involvement, say experts.

However, NARUC's Ramsey says, "That is the least likely outcome. I believe there will be a state role...[and]...it will not be a minor one."