Court Tells FCC to Review Verizon Forbearance Denial

A federal appeals court has ordered the FCC to review the logic it used in denying a far-reaching forbearance petition filed by Verizon Communications Inc. (VZ).

The D.C. Circuit Court of Appeals late Friday said that because the FCC used actual, instead of potential, market competition in denying Verizon’s request for pricing relief in six Northeastern markets, it needs to re-analyze its reasoning and data.

Jessica Zufolo, a senior telecom analyst for investment bank Medley Global Advisors, said in a June 19 research note the court found fault with the FCC for looking “only at actual competition without explaining why it changed course.”

Zufolo added: “The FCC will now need to review its impairment analysis that was used to determine the level of competitive entry in each particular wire center.”

The move, she said, will be welcomed by both competitors and incumbents. And yet, Zufolo cautioned, “it may take a while for the FCC to arrive at a final conclusion and it may not yield the kind of result VZ was seeking in its original petition.”

Above all, the petition’s remand raises the stakes for competitors relying on unbundled access, and for new FCC officials, Zufolo said.

“The task set forth by the court to reconsider the commission’s impairment findings … will now be up to incoming FCC Chairman Julius Genachowski and a new set of commissioners to determine,” said Zufolo. “Verizon may not have the votes it once had to push through the relief they are seeking in a remand context.”

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