Thursday, March 14, 2013

FCC Opts for Delay over Deregulation in Forbearance Process

The FCC's forbearance process has sadly proven more prone to delaying action than deregulatory action. Too often the FCC takes too long to rule on forbearance petitions. This reluctance to forbear from enforcing legacy voice regulations becomes less and less justifiable as the broadband era progresses and as the free market offers consumers more and more product and service choices.  

Orders issued by the FCC in February on forbearance petitions by USTelecom and CenturyLink are the latest reminders of the regrettable near breakdown of the regulatory forbearance process. Both proceedings have been beset by delays. In both instances the FCC has consumed its year-long statutory shot clock for ruling and then granted itself 90-day extensions.

The 1996 Telecom Act obligates the FCC to deregulate whenever circumstances satisfy Section 10's forbearance criterion. That is, the FCC must forbear from applying any telecommunications law or regulation if it determines that enforcement is not necessary to ensure that charges are just and reasonable nor necessary to protect consumers, and if it determines that forbearance is consistent with the public interest.

Congress attempted to add teeth to Section 10 by including a shot clock. If the FCC fails to respond to a forbearance petition within one year's time, or fifteen months if the agency grants itself a three month extension, the petition "shall be deemed granted" by operation of law.

But as I explained in my Perspectives from FSF Scholars paper, "Delaying Deregulation: Forbearance at the FCC," rulings on petitions are too frequently rendered after the end of the one-year shot clock, and at or near the end of the 90-day extension. Such delays are strongly suggestive of the agency's general aversion to the exercise of its forbearance obligation. Now consider two new cases in point.

On February 28, the FCC finally released an order on USTelecom's forbearance petition involving 17 categories of legacy voice service regulations. USTelecom filed its petition on February 12, 2012. The FCC sat on the petition for a year's time and granted itself an extension on February 2, 2013. The February 28 order, however, was limited to granting relief from only two-and-a-half regulatory provisions, including its § 64.1 traffic damage claim rules. According to the order: "Adopted in 1936 by an order of the Commission’s Telegraph Division, section 64.1 was originally intended to address issues with claims against telegraph carriers arising from errors in, or delayed delivery or non-delivery of, messages and money orders. Today, telegraph service is obsolete." That is, it took over a year's time to grant forbearance relief regarding some very old regulations where no party raised any specific objections. In any event, USTelecom's petition remains pending regarding several remaining regulations.

And on February 22, the FCC issued an order granting itself a 90-day extension to consider a CenturyLink's petition. CenturyLink seeks forbearance relief from enforcement of legacy regulations with respect to its enterprise broadband services. Its petition was filed with the FCC back on February 23, 2012. In prior blog posts, FSF President Randolph May and I have written about the strong case to be made for granting CenturyLink's forbearance petition regarding broadband enterprise services.

Unfortunately, lack of timely action on both USTelecom's petition and CenturyLink's petition are part of a repeating pattern of FCC delay and resistance to forbearance relief. For evidence of this pattern, consider the following dozen-plus instances from recent years. In every instance below the FCC used up its entire one-year shot clock in considering forbearance petitions and used nearly all 90 days of its self-granted extensions:
  • SBC Title II IP-Platform Order (2005) – denying forbearance from Title II regulations as applied to IP Platform Services (petition filed: Feb. 5, 2004; order released: May 5, 2005)

  • Qwest Omaha Order (2005) – granting in part and denying in part forbearance from certain section 251 and other obligations in the Omaha, Nebraska Metropolitan Statistical Area (MSA) (petition filed: Jun. 21, 2004; order adopted: Sept 16, 2005; order released: Dec. 2, 2005)

  • Verizon Computer Inquiry Petition (2005-6) – taking no agency action, the Commission issued a news release announcing that the petition had been granted by operation of law regarding requested relief from Title II requirements or Computer Inquiry rules (petition filed: Dec. 20, 2005 ; deemed granted: Mar. 20, 2007)

  • Verizon 6 MSA Order (2007) - denying forbearance from dominant carrier, Computer III, and UNE regulations in 6 MSAs (petitions filed: Sept. 6, 2006; order released: Dec. 5, 2007)

  • ACS UNE Order (2007) - granting certain conditional forbearance from unbundling obligations in wire centers in the Anchorage, Alaska study area (petition filed: Sept. 30, 2005; order adopted: Dec. 28, 2006; order released: January 30, 2007)

  • ACS Dominance Order (2007) - granting in part, subject to conditions, certain forbearance from dominant carrier regulation in Anchorage, Alaska (petition filed: May 22, 2006; order released: Aug. 20, 2007)

  • AT&T/BellSouth Computer Inquiry Order (2007) – granting forbearance from Title II requirements or Computer Inquiry rules (petition filed: Jul. 13, 2006; order released: Oct. 12, 2007)

  • Embarq Computer Inquiry Order (2007) - granting forbearance from Title II requirements or Computer Inquiry rules (petition filed: Jul 26. 26, 2006; order released: Oct. 24, 2007)

  • Qwest Terry Order (2008) - granting certain forbearance from dominant carrier and UNE obligations in the Terry, Montana exchange (petition filed: Jan. 22, 2007; order released: Apr. 21, 2008)

  • Qwest 4 Order (2008) - denying forbearance from dominant carrier, Computer III, and UNE regulations in 4 MSAs (petitions filed: Apr. 27, 2007; order released: Jul. 25, 2008)

  • Verizon New England and Rhode Island Petitions (2008-9) – closing proceeding involving requested relief from dominant carrier, Computer III, and UNE regulations in two MSAs following Verizon's withdrawal of petitions a few days before the end of the Commission's extension period (petitions filed: Feb. 14, 2008; petitions withdrawn: May 12, 2009)

  • Qwest Phoenix MSA Order (2010) – denying forbearance from dominant carrier, Computer III, and UNE regulations (petition filed: Mar. 24, 2009; order released: Jun. 22, 2010)

  • NCTA Section 652 Order (2012) – granting, in part, forbearance from Section 652 requirements (petition filed: Jun. 21, 2011; order released: Sept. 17, 2012)
These examples demonstrate how the Congressionally-imposed shot clock for ensuring prompt deregulatory action has been turned on its head and is now a license to delay action. Many of the orders above were subject to serious legal challenges, and in some cases FCC rulings denying relief were overturned and remanded. Substantial delays have even preceded instances where the FCC finally acceded to forbearance relief.

It shouldn't be this way.

In today's digital environment, innovation and competition in the free market for broadband services are more attuned to consumer welfare than regulations addressed to an older and increasingly obsolete generation of voice services. These dynamic market changes call for more promptness in considering forbearance petitions, at the very least. Also, the FCC purports to be serious about facilitating the transition to next-generation broadband networks and to retiring the legacy public switched telephone network. If it is, then it should be more open to eliminating last-generation rules that are becoming a costly drag on investment and innovation and prone to undermining competition.