Where Do We Go From Here?

Posted: 10/2003

Where Do We Go From Here?
First Stop: State Regulatory Commissions

By Josh Long

The battle over wholesale phone rules will
be fought at state public service commissions over the next year. Regulators
have nine months to analyze whether there is adequate competition in a
designated market to phase out rules that allow local phone companies to lease
the Bell networks at steep discounts through the so-called unbundled network
element -platform (UNE-P).

In August, the Federal Communications Commission released the
Triennial Review order, the 576-page document governing new phone and broadband

I havent heard of one state yet that wants to do it
without a hearing, says a federal regulatory expert who works for a large phone

Kevin Bloom, a spokesman with the Florida Public Service
Commission, which oversees eight local exchange carriers, says the five
commissioners would have to vote on whether to hold hearings.

There definitely is precedent for open forums in Florida. When
Florida regulators considered how to set the wholesale price of UNEs, there were
endless hearings and rounds of discovery and interrogatories and depositions,
Bloom says.

Much of the evidence, however, will be presented on paper. In
the Florida UNE rate-setting case, says Bloom, BellSouth Corp. electronically submitted a cost study that was the equivalent
of 35,000 pages.

Robert Nelson, a commissioner with the Michigan Public Service
Commission, says the state regulator solicited comments from phone companies
regarding how to handle the Triennial Review analysis a few weeks before the
order was released. During an interview in late August, he said the commission
had not decided whether to hold hearings.

Mark Cooper, director of research with the Consumer Federation
of America, expects bloody regulatory battles in big-money states where there is
fierce local phone competition, including California, Florida, Illinois, New
York and Texas. Expect a big battle in Michigan too, say observers. In
certain states I think its going to become trench warfare, says Tom
Koutsky, vice president of law and public policy with Florida-based Z-Tel
Technologies Inc.

Brad Ramsay

Brad Ramsay, general counsel with the National Association of
Regulatory Utility Commissioners, says it is likely big states will hold open
forums where industry insiders, consumer advocates and other stakeholders will
testify and answer to cross-examination.

However, Its [not] going to be like a zoning hearing
where all the people in the community line up and say I think, I think, I think,
Ramsay says. Public opinion is not germane to the findings we have to
make, the lawyer adds. Its not going to help the record at all to say
nine out of 10 consumers in the state of Texas want us to keep the platform.

The FCC listed specific criteria state regulators must
evaluate in determining whether to preserve the resale platform or remove it in
a market. However, there is room for different interpretations. For example, the FCC did not define geographic areas. How
regulators define a market will prove vital in determining whether the states
are obligated to preserve the rules. That may be the battle, says Koutsky.

Tom Koutsky

Koutsky says regulators must involve the public in the
process. I think the state commissions … are really going to need to talk
with customers, consumers and figure out ways to get their input,
he says. Its not about ILECs vs. CLECs. Its about the service customers
are receiving today and whether they will be able to receive it tomorrow.

Charlie Beck, interim general counsel with the Florida Office
of Public Counsel, which represents Florida citizens in matters before the
public service commission, said he did not know whether the agency would travel
throughout the state and accept public testimony on the Triennial Review.

In August, the agency requested public hearings on petitions
by three incumbent phone companies BellSouth Corp., Sprint Corp. and Verizon
Communications Inc. to raise local phone rates in Florida. We are trying
to get public hearings on the local rate increases … and we are swamped right
now, he said.

Larry Spiwak

Certainly the commission is going to hold hearings [on the
Triennial Review] that are open to the public but they will do it in

Larry Spiwak, president of The Phoenix Center for Advanced
Legal and Economic Policy Studies, says the public will play a large role in the
Triennial Review analysis. I can guarantee you there is going to be outside
involvement, he says. It is a very public process but it is a very
difficult process for state regulators, who have been instructed to sort out
a highly complex controversy in less than a year.

AT&T Corp.
Florida Public Service Commission
National Association of Regulatory Utility Commissioners
SBC Communications Inc.
The Phoenix Center for Advanced Legal and Economic Policy Studies
Z-Tel Technologies Inc.

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