Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
In the Matter of )
)
Inquiry Concerning the Deployment of )
Advanced Telecommunications )
Capability to All Americans in a Reasonable )
And Timely Fashion, and Possible Steps ) CC
Docket No. 98-146
to Accelerate Such Deployment )
Pursuant to Section 706 of the )
Telecommunications Act of 1996 )
)
Third Notice of Inquiry )
COMMENTS
OF THE
The United States Telecom
Association (“USTA”)[1]
hereby files its comments in response to the Commission’s Third Notice of Inquiry[2]
(“NOI”) on the deployment of
advanced telecommunications services to all
Americans pursuant to Section 706 of the 1996 Act. Advanced telecommunications services are being deployed
nationwide on a reasonable and timely basis.
Commission adoption of symmetrical regulations applied to all providers
of advanced telecommunications services, elimination of unnecessary ILEC regulatory
obligations for such services and review of universal service issues involving
advanced telecommunications services will ultimately determine whether the
goals of Section 706 will be realized.[3]
The Commission’s policy and
regulatory reforms must recognize that deployment of advanced
telecommunications networks and services involves a business decision by every
carrier. Decisions by carriers to make
the financial, technical and human resource commitments necessary to deploy new
technologies and services should be made by carriers in response to market
forces. Clearly, a number of market factors, including cost, network
configuration, demand for services, and universal service issues may impact the
deployment of advanced services in any given region of the country. Depending
upon market forces, some providers of advanced services may find that it is not
economically or financially viable to provide advanced telecommunications
services over existing networks or to upgrade those networks or to deploy networks
even under the best of regulatory policies and market conditions. Among ILECs, serving smaller and rural
communities, this may be particularly true.
The Commission must ensure its rules
are flexible enough to address the unique circumstances of individual
companies, in order to ensure advanced services are deployed on a reasonable
and timely basis.
The Commission’s NOI asks whether advanced
telecommunications capability is being deployed to all Americans, whether
deployment of such services are reasonable and timely, and what actions can
accelerate deployment of advanced telecommunications services.
The Commission’s recent
report on the deployment of advanced services to all Americans entitled High-Speed Services for Internet
Access: Subscribership as of December
31, 2000 (“Advanced Services Report”) provides insight on access and
deployment of such services.[4] The data in the Advanced Services Report unequivocally supports the conclusion that
advanced telecommunications services are being timely deployed throughout the
country. As the Commission’s Advanced Services Report explains:
Summary Statistics
·
High-speed
lines connecting homes and businesses to the Internet increased by 63% during
the second half of the year 2000, to a total of 7.1 million. The rate of growth
for the full year was 158%.
·
Of
the total 7.1 million high-speed lines, 5.2 million were residential and small
business subscribers.
·
About
4.3 million of the 7.1 million high-speed lines provided services at speeds of
over 200 kilobits per second (kbps) in both directions, and thus met the
Commission's definition of advanced services, an increase of 51% during the
last six months of the year 2000. The rate of growth for the full year was
118%.
·
At
the end of the year 2000, the presence of high-speed service subscribers was
reported in all fifty states, the District of Columbia, Puerto Rico, and the
Virgin Islands. Subscribers were reported present in 75% of the nation's zip
codes, compared to 56% at the end of 1999.
·
High-speed
asymmetric DSL (ADSL) lines in service increased by 108% during the second half
of the year 2000, to 2 million lines. The rate of growth for the full year was
435%.
·
High-speed
Internet connections over coaxial cable systems increased by 57% during the
final six months of the year 2000, to a total of 3.6 million. The rate of
growth for the full year was 153%.
·
Although
the provision of high-speed lines by satellite and fixed wireless technology
represents a small fraction of the total high-speed lines in use, the number of
lines grew from 50,000 in December 1999 to 112,000 in December 2000.
·
High-speed
subscribers are reported present in 97% of the most densely populated zip codes.
The comparable figure is 45% among zip codes with the lowest population
densities, compared to 24% a year earlier.
·
For
zip codes ranked by median family income, high-speed subscribers are reported
present in 96% of the top one-tenth of zip codes and in 56% of the bottom
one-tenth of zip codes, compared to 42% a year earlier.[5]
The data provides numbers
which lead to a single, uncontroverted, conclusion: rapid deployment of
advanced telecommunications services continues to occur on a nationwide
basis. Future deployment of such
services will depend upon Commission reforms which recognize that competition,
driven by innovation, risk taking, and the demands of consumers and businesses
must be the foundation of Commission public policy. Conversely, maintaining regulations that stifle competition, and
create disincentives to investment in deployment of advanced telecommunications
networks and services, will simply impede nationwide deployment of such
services.
Notwithstanding this general conclusion, however, there are a few multi-exchange rural telephone companies and other smaller local exchange carriers that suffer from unique situations that make the provision of advanced services more difficult or virtually impossible. Smaller carriers often face difficult economic circumstances, such as low density, long distances from central offices, and an inability to create sufficient demand for services, that has slowed the provision of advanced services to many rural Americans. Because of these unique economic circumstances, general regulations applicable to all local exchange carriers at the federal level can and do undermine some carriers’ abilities to provide advanced services and hamper competitive responses. In addition, demand for advance services at compensatory prices is often low because these prices are higher than some rural Americans can afford.
In particular, access charge
rules in the CALLS plan do not provide in all cases sufficient flexibility to
allow smaller carriers to meet competition and to modernize their
networks. Because these rules are
one-size-fits-all, they impact individual carriers disproportionately,
depending on their unique circumstances.
Obtaining waivers or forbearance from these rules is expensive, and is
subject to extensive delays, which makes these procedural devices less than
optimal. The Commission must reassess
its overall rules in order to make them flexible enough to consider unique
individual circumstances to permit carriers to deploy advanced services in
rural America on a reasonable and timely basis.
The Commission can ensure that ongoing deployment of advanced
telecommunications services continues to occur more rapidly by eliminating
asymmetrical regulation of carriers providing functionally equivalent services,[6]
and forbearing from applying burdensome and unnecessary regulations on ILEC
advanced telecommunications networks and services. Commission action on these regulatory issues will provide
incentives for all carriers to commit the technical, financial and human
resources necessary for the full intent of Section 706 to be realized. Infrastructure deployments critical to the
national economy will rest on decisions made by the Commission. Decisions by the Commission which foster
confusion will only delay rapid deployment of advanced services, weaken the
economy, and cast doubt on whether the vision of Section 706 will ever be
attainable.
A.
Regulatory Parity - - Symmetry
in Regulatory Applications
What is required in today’s rapidly changing technological environment is a new regulatory paradigm that is competitively neutral. The Commission has raised the issue of regulatory policies that should be symmetrically applied and competitively neutral regardless of technology deployed to provide functionally equivalent services. In the initial NOI on Section 706, the Commission acknowledged that its “regulatory system is uneven in its treatment of different technologies.”[7] As the Commission explained, “statutes and rules contain separate regimes for wireline and wireless, for local and long distance, for telecommunications, broadcasts, and cable television, and so on.”[8] According to the Commission, its regulations “may distort the performance of the market to have separate regimes of regulation for competitors in a converging market.”[9] The Commission should exercise its existing authority under Sections 706 and 10 of the 1996 Act to promote competition by eliminating application of asymmetrical regulations to companies in different market segments that provide functionally equivalent services, and forbear from imposing needless regulations on carriers based upon legacy polices. This new public policy approach would benefit consumers and businesses by allowing market forces to drive competition, which ultimately increases choices and lowers prices for services.
Functionally equivalent
Internet transport services provided over different technological platforms
should be free of unnecessary government regulations. Section 230(b)(1) of the Act states: “It is the policy of the United States - (1) to promote the continued development of the Internet and
other interactive computer services and other interactive media.” 47 U.S.C. §230(b)(1). Section 230(b)(2) states that the
Commission’s mission is “to preserve the vibrant and competitive free market
that presently exists for the Internet and other interactive computer services,
unfettered by Federal or State regulation.”
47 U.S.C. §230(b)(2).
Broadband Internet transport,
although not ubiquitous, is a competitive service. There are multiple technological platforms (e.g., DSL, cable, fixed wireless, satellite) used to transport
high-speed broadband data, content, and Internet connections to endusers. Deployment
of Advanced Telecommunication Capability: Second Report at 6, released
August 2000 (“competition is emerging, rapid buildout of necessary
infrastructure continues, and extensive investment is pouring into this segment of the economy ….”); LMDS Order at 11, ¶23, CC Docket No. 92-297, released June 27, 2000 (“ the
competitive nature of the broadband market … the number of consumer broadband
options within the various broadband technologies … together with … price
competition and price reductions in that market, convinces us that incumbent
carriers will not be able to … dominate the market … [or] cause competitive harm in any market ….”). The
Commission has determined that competition in the advanced telecommunications
services market is becoming broader and more diverse with no single
technological delivery system dominating: “The record before us, which shows a
continuing increase in consumer broadband choices within and among the various
delivery technologies – DSL, cable modems, satellite, fixed wireless, and mobile
wireless suggest that no group of firms or technology will likely be able to
dominate the provision of broadband services.”
LMDS Order at 9, ¶19.
Commission regulations that discriminate against a particular technological platform that provides functionally equivalent Internet transport services to endusers (1) stifles competition and investment in deployment of advanced telecommunications capability, (2) is anti-competitive, (3) is protectionist in favor of a given technological platform providing functionally equivalent services, (4) is discriminatory public policy (5) is contrary to the public’s interest in receiving the benefits of competition and multiple choices of technological platforms providing functionally equivalent services, and (6) is inconsistent with the goals of section 706 (deployment of advanced services to all Americans regardless of the technological platform), Sections 10 and 230(b), and Section 7, 47 U.S.C. §157 (“It shall be the policy of the United States to encourage the provision of new technologies and services to the public.”).
Regulations invariably
impose costs on those service providers who are regulated. In addition, regulations may also slow a
service provider’s ability to respond to changes in the marketplace. The selective imposition of costs and
constraints on a service provider’s operations unquestionably gives a competing
nonregulated, or less regulated, service provider a competitive advantage over
its regulated competitor. Such a
dichotomy in regulatory treatment can only be justified when it has been
clearly demonstrated that regulation is necessary in order to restrain the
exercise of market power by the regulated service provider in the relevant
service and geographic markets in which it is regulated.[10] Consequently, the Commission should
continually strive to eliminate regulations which are no longer relevant in a
competitive landscape and to refrain from imposing new regulation on carriers
unless absolutely necessary. The
Commission has defined market power as “the ability to raise and maintain price
above the competitive level without driving away so many customers as to make
the increase unprofitable.”[11] Similarly, the 1992 Department of Justice
/Federal Trade Commission Merger Guidelines define market power as “the ability
profitably to maintain prices above competitive levels for a significant period
of time.”[12] The ability to exercise market power by any
of the existing service providers in the high-speed data services or broadband
Internet access market, as evidenced by the Commission’s own analysis and a
recent study by the General Accounting Office,[13]
is nonexistent.
ILEC DSL services and cable modem services are functionally equivalent services provided by carriers which have historically been regulated under different provisions of the Communications Act of 1934, as amended. The Commission chooses to adopt a hands-off policy for cable modem Internet access, while burdening ILEC DSL Internet access services with regulations that stifle competition. It is time for the Commission to recognize that functionally equivalent services should receive the same non-discriminatory, competitively neutral, regulatory treatment. Given the competitive landscape in advanced services, the Commission should examine regulatory parity between ILEC DSL services and cable modem services where appropriate.
The Supreme Court’s decision
in AT&T v. Iowa.[14]
instructed the Commission to apply the necessary and impair standards of
Section 251(d)(2) in its review of ILEC unbundling obligations in Section 251
(c)(3). According to the Court, the
Commission
must “determine on a rational basis which network elements must be made
available, taking into account the objectives of the 1996 Act and giving some
substance to the ‘necessary’ and ‘impair’ requirements”[15] The Commission should forbear from
regulating advanced services because of the competition in the market for such
services and because no provider or technological platform dominates the
delivering of these services.
The Commission, however, has imposed additional unbundling obligations,
in perpetuity, on ILEC network and advanced telecommunications services deployments. In the Commission’s Reconsideration Order on Advanced Services (‘Reconsideration
Order”) released January 19, 2001, ILECs must continue to provide competitors
with unbundled access to the high frequency portion of the local loop for
broadband services where ILECs use the same loop to provide voice
services. Also, the Commission’s Reconsideration Order (1) requires ILECs
to extend line sharing to their fiber and remote
terminal deployments, (2) made clear that ILECs
are required to provide unbundling over existing facilities and new facilities
deployed in the future, (3) required ILECs to immediately provide operations
support services to competitors using a UNE platform to provide both voice and
DSL services over the same loop - - known as "line splitting," (4)
requires BOCs to demonstrate compliance with the Commission’s line splitting regulations in their Section
271 state applications for long distance authority, and
(5) included a further notice requesting comments
on how additional line sharing can take place over ILEC deployed fiber. [16]
In
response to the Further Notice of
Proposed Rulemaking (“FNPRM”) on advanced services, USTA opposed adoption
of additional burdensome regulations on ILEC deployment of advanced
telecommunications networks and services in a market the Commission has
determined is competitive.[17] The Commission’s proposed line sharing
regulations in the FNPRM, if adopted,
would hamper the ability of ILECs to compete against cable broadband service
providers. Moreover, additional
regulations would have a chilling affect on new carrier deployments by ILECs. It would be precipitous for the Commission to impose additional
regulations for line sharing over ILEC fiber networks and remote terminals as
suggested in the FNPRM, pending the
outcome of litigation. The adoption of
changes in the existing definition for shared transport is unnecessary. In addition, there is no basis for the
Commission to adopt a UNE platform for data.
Line sharing and UNE platforms for data are unnecessary because the
Commission has consistently determined that the advanced telecommunications
services market is in fact competitive.
The Commission’s proposals regarding line sharing are contrary to the
public interest and inconsistent with the Supreme Court’s necessary and impair
analysis under Section 251(d)(2) of the Act which the Court made clear limits
any efforts by the Commission to impose upon ILECs unbundling obligations. Additional line sharing regulations are not
required to promote competition for advanced telecommunications services and
should not be mandated by the Commission.
All ILECs with limited resources are constrained to invest financial resources to deploy new and innovative technologies and services in underserved markets given the ongoing requirement to provision line sharing over such facilities. Smaller and rural ILECs, in particular, face great financial limitations in providing advanced telecommunications services in the markets they serve. These are markets that the Commission has consistently expressed concerned about deployment of advanced telecommunications services. Compliance with unnecessary and complex regulations by carriers creates unnecessary business expenses. ILECs are not unlike businesses in other market segments. They are not in a position to invest limited financial resources in the deployment of network upgrades for advanced telecommunications networks and services, without the possibility of earning a market-driven return on that investment. Every market, and particularly those in underserved areas, is less likely to receive the benefits of advanced telecommunications networks and services where the risk of financial loss is enhanced by Commission regulations.
C. Universal
Service and Access to Advanced
Telecommunications Services
The Federal – State Joint Board (“Joint Board’) has requested comments on “what services, if any should be added to … the list of core services eligible for federal universal service support and how those core services should be defined.”[18] In its Public Notice, the Joint Board inquiries “whether any advanced or high-speed services should be included within the list of core services.”[19] USTA will file comments on this issue in the Joint Board proceedings. The Joint Board’s inquiry, along with the Commission’s assessment of the deployment of advanced telecommunications services, underscores the need for Commission policies that promote competition
among all providers of such services under conditions that neither favors nor disadvantages any particular provider or technology.
CONCLUSION
Section 706 of the 1996 Act envisions that all Americans would benefit from access to advanced telecommunications networks and services. Advanced services are being provided over different wireline and wireless platforms. Carriers are responding to the demand for access to high-speed Internet access, data and advanced telecommunications services on a nationwide basis. However, a few multi-exchange rural and smaller carriers face unique circumstances that impede provision of advanced services to rural Americans, which are exacerbated by inflexible commission regulations. The Commission should impose regulatory parity among advanced service providers, as they deploy advanced networks and services, in a manner that enhances competition at all levels. The Commission must adopt regulatory and policy reforms which are symmetrical in application and competitively neutral - - regulations and policies favoring no carrier or technology - - to ensure that the future deployment of advanced telecommunications services will greatly exceed current standards and fulfill the promise of Section 706. In addition, the Commission must recognize that in rural and smaller communities, market conditions, financial and technological limitations and the level of consumer and business demand will dictate whether a particular network platform can economically provide advanced telecommunications services. ILECs, who serve these markets, may be particularly vulnerable to such conditions, and absent financial incentives, may not be in a position to deploy advanced telecommunications services over their networks.
Respectfully submitted,
UNITED STATES TELECOM ASSOCIATION
/s/ Keith Townsend
September 24, 2001 By: _________________________________________
Lawrence E. Sarjeant
Linda L. Kent
Keith Townsend
John W. Hunter
Julie E. Rones
1401 H Street, NW
Suite 600
Washington, DC 20005
(202) 326-7371
[1] USTA is the nation’s preeminent telecom trade
association representing a diverse membership of over 1,200 telecommunications
companies, including ILECs and CLECs, that provide competitive
telecommunications products and services including voice, data and video
services over wireline and wireless networks domestically and in international
markets worldwide.
[2] FCC 01-223, released August 10, 2001.
[3] USTA’s comments address advanced services defined in
the SBC/Ameritech merger agreement: “For
purposes of these Conditions, the term "Advanced Services" means any
intrastate or interstate wireline telecommunications services, such as ADSL,
IDSL, xDSL, Frame Relay, Cell Relay and VPOP-Dial Access Service (an SBC Frame
Relay-based service) that rely on packetized technology and have the capability
of supporting transmissions speeds of at least 56 kilobits per second in both
directions. This definition of Advanced
Services does not include (1) data services that are not primarily based on
packetized technology, such as ISDN, (2) x.25-based and x.75-based packet
technologies, or (3) circuit switched services (such as circuit switched voice
grade service) regardless of the technology, protocols or speeds used for the
transmission of such services.” See 14 FCC Rcd at14969 (1999). USTA’s comments in this proceeding are not
intended to address elimination of regulations on ILEC high-capacity loops and
dedicated transport in which USTA and USTA’s CLEC Council filed comments. See
USTA’s Comments and USTA’s CLEC Council Comments on the Joint Petition of
BellSouth, SBC, and Verizon for Elimination of Mandatory Unbundling of
High-Capacity Loops and Dedicated Transport,
CC Docket No. 96-98, filed June 11, 2001.
[4] High-Speed
Services for Internet Access:
Subscribership as of December 31, 2000 by
the Industry Analysis Division, Common Carrier Bureau, released August 10,
2001.
[5] FCC News Release August 9, 2001.
[6] USTA Comments filed December 1, 2000, and Reply
Comments January 10, 2001, In the Matter
of Inquiry Concerning High-Speed Access to the Internet Over Cable and Other
Facilities, GN Docket No. 00-185.
[7] NOI at 2,¶4,
released August 7, 1998.
[8] NOI at 2,¶4,
released August 7, 1998.
[9] Id.
[10] Competitive Carrier Fourth Report and Order, 95 FCC 2d at 562, ¶13.
[11] Id. at 558, ¶¶ 7-8.
[12] Id.
[13] Technological
and Regulatory Factors Affecting Consumer Choice of Internet Providers, Report
to the Subcommittee on Anti-trust, Business Rights and Competition, Committee
on the Judiciary, U.S. Senate, released October 2000.
[14] 119 S.Ct. 721 (1999).
[15] Id. at 736.
[16] Deployment of Wireline Services Offering Advanced Telecommunications Capability, 3rd R&O on Recon., 4th R&O on Recon., 3rd FNPRM, 6th NPRM, CC Docket Nos 98-146 & 96-98, released January 22, 2001.
[17] USTA Comments filed February 27, 2001.
[18] FCC Public Notice 01-J-1 at 2, Federal – State Joint Board on Universal Service, CC Docket No. 96-45, released August 21, 2001.
[19] Id. at 3.