Forbearance Race Not Over

Famed race car mechanic Smokey Yunick made a career out of testing NASCARs patience with his philosophy that its not what the rules say you cant do, its what they dont say you cant do. Over the past two years, incumbent service providers have taken that sentiment and run with it. Theyve used Section 10 of the 1996 Telecommunications Act five short paragraphs dedicated to the forbearance loophole to achieve deregulation on a scale Congress probably did not foresee. Forbearance, whether granted in whole or in part, no longer is the exception but the rule. This, CLECs say, marks the demise, not the implementation, of a law crafted to promote competition.

In September, several CLECs asked the FCC to impose rules on the forbearance process. They say a lack of standards is allowing incumbents to imperil competition. The FCC, by the PHONE+ deadline, had yet to comply. And time was almost up. The FCC was slated to vote, by Dec. 5, on one of the most controversial forbearance requests, which was submitted by Verizon Communications Inc. The future of UNEs is very much going to be decided on Dec. 5 the future of UNEs is the future of telecommunications, said Chris McKee, vice president and general counsel for Starvox Communications Inc. Its no checkered flag ending the forbearance race; the pipeline for 2008 was just as full as it was for 2007 (see list below).

Indeed, 2007 looked like a record-setting year for forbearance petitions, although that doesnt mean all went as well as the incumbents wished. Neither Qwest Communications International Inc. nor AT&T Inc., for example, received the breadth of relief they sought. Both companies had filed me too petitions modeled on the relief Verizon got in March 2006 from last-mile broadband connection rules.

The Qwest petition was due for a vote on Sept. 12. But the company yanked the request when it saw it would get less relief than it wanted. It re-filed the petition about a week later. The re-filing puts the new deadline at September 2008, but the 90-day extension a provision instituted by Congress could apply.

Not long after Qwest withdrew that request, AT&T received partial approval for its me too petition. The FCC said it made that decision because, if it hadnt done so by midnight of Oct. 11, the petition, like Verizons, would have been deemed granted. Congress crafted the deemed granted clause to state that, if the FCC didnt act on a forbearance petition by the deadline extended by 90 days, it automatically would be approved. That condition infuriates competitive service providers for several reasons, including that no official order is published when the FCC does not vote on a matter. Thus, no one except Verizon really knows the extent of the relief it received in 2006.

The FCC avoided a repeat of that scenario on Oct. 11. Commissioners voted 3-2 down party lines to grant AT&Ts petition in part. Still, AT&T got permission to price its commercial broadband services as it sees fit and not share those rates with providers using its networks. However, the FCC did establish a complaints process. It said any complaint made against AT&T would have to be resolved within five months.

Such inconsistent decision-making spurred a group of CLECs this fall to ask the FCC to immediately adopt rules governing forbearance proceedings, including:

  • Ensuring that all forbearance proceedings include adequate comment and review time.
  • Requiring petitioners to submit all evidence providing forbearance is necessary and still in the public interest.
  • Preventing petitioners from filing critical information at the last minute, when it is too late for other parties to comment.
  • Ensuring the FCC issues a written order within a week of granting or denying a forbearance petition.

The forbearance frenzy has reigned ever since Qwest obtained UNE relief in the small market of Omaha, Neb. Verizon has asked for the same treatment in six of its major metro markets Boston, New York, Philadelphia, Pittsburgh, Providence, R.I., and Virginia Beach, Va. This was the petition due for a decision by Dec. 5. Qwest is seeking the same favoritism in four of its key regions, Denver, Minneapolis/St. Paul, Minn., Phoenix and Seattle. The 12-month deadline for that request is April 27, but it could be extended by 90 days, typical of these proceedings. Both companies contend they face pressure from wireline CLECs, wireless, VoIP, cable and fixed wireless providers, enough pressure to merit a loosening of the rules.

Forbearance Petitions Due in First Quarter 2008

Provider Relief Sought 12-Month Due Date 90-Day Extension
Cablevision From applying Title II requirements and application computer inquiry rules to broadband services offered by Cablevision Lightpath Jan. 16 Mid-April
Qwest From Section 251(c) and 271(c) requirements in particular and ILEC regulation in general in Terry, Mont. Jan. 22 Late April
AT&T From certain cost-assignment regulation (AT&T filed its petition on Jan. 25 and resubmitted a BellSouth petition on Feb. 9) Jan. 25 and Feb. 9 Late April, early May
Qwest From various rules, particularly UNE loops and transport unbundling and dominant carrier regulations in Denver, Minneapolis/St. Paul, Minn., Phoenix and Seattle April 27 Mid-July
AT&T From reporting requirements that AT&T says have ceased to serve regulatory purposes and specifically from rules that require AT&Ts ILEC affiliates to file certain ARMIS reports June 8 Early September

Source: Washington Telecom, Media & Tech Insider published by Stifel, Nicolaus & Company Inc.

AT&T Inc.
Cavalier Telephone & TV
Covad Communications Group Inc.
McLeodUSA Inc.
Qwest Communications International Inc.

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