Martin Defends Decision Not to Act on Verizon Petition

Fearing that incumbents will continue to slow infrastructure investment if they are forced to share their networks with competitive carriers, FCC Chairman Kevin Martin on Monday defended his decision to effectively allow Verizon Communications Inc. to reclassify its broadband services from telecommunications to information services. Among other implications, that could mean Verizon will no longer pay in the Universal Service Fund (USF) with proceeds from its broadband products, regardless of whether they are circuit-switched or IP-based. It also follows suit with other recent FCC actions that impede competitive carriers’ access to the incumbents’ networks.

Martin said he wants to promote U.S. broadband deployment and achieve a level playing field among communications operators; he noted that allowing Verizon to operate its circuit-switched and IP-based broadband services under Title I, instead of Title II, helps meet that goal.

The competitive industry blasted Martin’s decision not to block Verizon’s forbearance petition on March 19, when it came due; the RBOC filed the document in late 2004. “The chairman’s action yesterday represents the height of irresponsibility by a federal official,” said Earl Comstock, president and CEO of COMPTEL, in a news release. “With this action, the chairman has unilaterally abdicated the commission’s responsibilities with respect to oversight of Verizon’s common carrier service offerings. As a result, competition and consumers are now at the mercy of Verizon’s financial self-interest. If history is any guide, there will be predictable adverse results.”

Jessica Zufolo, a senior analyst for Medley Global Advisors, told clients in a note that Verizon likely will face court battles. “While this outcome may appear to hand Verizon a victory, there is a high probability of legal risk associated with the FCC’s decision to let the petition go into effect,” she wrote.

On Monday, during COMPTEL’s general session, Martin faced the ire of competitive carriers during a question-and-answer session. He was quizzed by Comstock and audience members on his decision not to take action on the petition. By law, if the FCC does not act on a request such as Verizon’s within 15 months, the petition automatically is granted. Martin said he is trying to create a level playing field among all communications operators, and said it is better to regulate down — in other words, remove regulations from telephone incumbents rather than impose regulations on the cable operators — in trying to achieve that aim. “Will this distinction adversely impact access to the incumbents?” Comstock asked. Martin replied, “Yes.”

The CEO of a facilities-based CLEC in Denver asked, “Are you going to follow in [former FCC Chairman Michael] Powell’s footsteps or are you going to help us compete with the Baby Bells,” to a long round of applause. Martin declined to answer the first part of the question, but said he is working to establish a “consistent regulatory framework,” which in part means incumbents need to be motivated to invest in infrastructure. He argued that if incumbents have to share their networks, they will stop investing in the infrastructure needed to promote ubiquitous broadband deployment in the United States.

Martin did exhort COMPTEL members to lobby for their most pressing needs as he works to change the telecommunications structure from an intramodal framework to an intermodal one. Still, Comstock interjected, the competitive industry needs a clear set of rules because not every provider is starting from the same position — a level playing field, he argued, will be nearly impossible to achieve if considerations are not granted to competitive providers.

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