Foregone Conclusions

Posted: 2/2003

Foregone Conclusions
Litigation Expected Following Triennial Review

By Josh Long

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)

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

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."


American Enterprise Institute
for Public Policy Research

AT&T Corp.

Federal Communications Commission

Goldman Sachs

Kaufman Bros. LP

Kelley, Drye & Warren

Legg Mason

Merrill Lynch

National Association of Regulatory Utility

PACE Coalition

The Cato Institute

WorldCom Inc.


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