Adelstein Says DSL Order ‘Basically Rewriting’ Telecom Act

Saying he’s impressed with FCC accomplishments on DSL after the Supreme Court’s Brand X ruling, Adelstein nonetheless voiced unhappiness at the Commission’s recasting DSL from a telecom service under Title II Communications Act to an information service under Title I, “where it’s not clear we have any authority over anything.” Noting that the U.S. Appeals Court, D.C., has been dubious of the FCC’s assertion of Title I authority, Adelstein said: “If the D.C. Circuit gets pushy” in this case “maybe this time, we'll have to take it up to the Supreme Court to get some deference.”

Adelstein said he’s pleased the policy lets rural telcos continue NECA pooling by telling them “if you want to continue [DSL] as telecom service, be our guest.” Of this “unique idea” he added, “I can’t wait till the lawyers get hold of that.”

The last roadblock cleared to pass the DSL item without dissent involved loss of universal-service revenue from moving the service under Title I, Adelstein said: “We fought on that to the end.” He said he wasn’t entirely satisfied with the resolution, which continues universal service contributions 9 months and commits the FCC to making up the shortfall somehow. Adelstein -- who signaled his qualms by agreeing with the outcome in a concurrence -- acknowledged DSL had borne “an unfair competitive disadvantage” from the universal service obligation. But he said his solution would have been “to put cable modem on” that status, not take DSL off the list of services billed for universal service.

FCC adoption of 4 principles of “net neutrality” was a “major statement,” though it ratified what then-Chmn. Michael Powell already had declared, Adelstein said. “Commissioner Copps put a lot of effort into getting that in there,” he said.

Adelstein patted the FCC, and in particular Chmn. Martin, on the back for overcoming differences to pull the DSL decision together quickly. The ruling “threaded the needle” and “gives some certainty to everybody… whether some of us are dragged kicking or screaming or not,” Adelstein said: “Even though it’s not the order I would have drafted… the bottom line was something I could live with.”

The accomplishment “strengthens the Commission” as it goes forward, Adelstein said. He said rural carriers were “pretty happy” and “CLECs came out okay,” maintaining their assured line access for a year, “so you didn’t have Earl [Comstock, CompTel pres.] out there today screaming and moaning.” Lauding the decision’s wisdom, Adelstein said Comstock had found himself joining in praise of it with a Bell representative, fellow panel member Melissa Newman, Qwest regulatory affairs vp. But Adelstein also joked that the panel had been marked with much “sucking up” to him in the audience.

“This is a great decision,” Newman said. Calling it “long overdue,” she said it had arrived “with a speed from the Commission I've never seen.” Newman promised that Qwest will “carry everything” -- ISPs as wells as well as broadcasters. “The transition’s a little long, but we'll get there,” she said of DSL deregulation: “There’s a roadmap.” Comstock said: “A lot of good was done in the final draft of that order, and we're eagerly awaiting the details.”

Adelstein marveled at how much the Commission had done the previous 3 weeks. Besides the DSL decision, he mentioned approving the Nextel-Sprint merger and the AWS band plan and auction. He dwelt at length on the Sony BMG payola scandal - though, Adelstein’s pursuit of the issue notwithstanding, the case was broken by N.Y. Attorney Gen. Eliot Spitzer (D). The commissioner applauded Spitzer’s offer “to help the FCC any way he can,” saying the candidate for governor of N.Y. doesn’t care who gets credit for further action against payola.

In the wireless takeover, Adelstein said he overcame his skepticism about industry concentration to consider it most “important overall” that Sprint gain the size to compete with otherwise dominant Verizon Wireless and Cingular. He related how he used “one of the advantages of being 2-2” -- the FCC’s partisan division conferred by its open seat -- by suggesting to what turned out to be a promptly receptive Sprint that it commit to offer wireless broadband service using the combined company’s “massive amount of spectrum” at 2.5 GHz, instead of leaving it fallow, in light of the challenge of integrating iDEN and CDMA networks and the attractiveness of focusing on 3G broadband opportunities.

An onlooker asked, with seeming wistfulness, if the FCC might act as quickly to address intercarrier compensation as it had DSL. Adelstein answered immediately: “No.” He called compensation “a thorny, thorny issue… It’s going to take a heck of a lot longer than 3 weeks.” He praised Ia. regulator Elliott Smith, chmn. of NARUC’s Intercarrier Compensation Task Force, as “doing yeoman’s work” in advancing the discussion. Smith offered himself as neutral -- outside the decision-making FCC -- helpful in dealing with a matter where “everyone’s got an angle” based on a self-interested agenda. -- Louis Trager

FCBA Seminar West Notebook

SBC and Verizon are setting up the whole phone industry for a black eye with their fiber video projects, Melissa Newman, Qwest regulatory affairs vp, told the FCBA Seminar West over the weekend in Berkeley, Cal. “They're all behind in every category” of milestone, she said. “It’s a very hard technology. It’s not easy to do… I've asked SBC and Verizon to tone it down” in their marketing, so they don’t raise expectations unrealistically, Newman said. Fiber to the premises, such as Verizon is pursuing, “makes no sense,” she said. According to Newman, Qwest agrees with SBC that fiber to the node is the way to go, but her company’s approach is “more realistic, probably because we have a territory that’s very hard to serve in general.” Dan Brenner, NCTA senior vp-law & regulatory policy, called the Tex. legislature’s consideration of statewide video franchising “a cliffhanger that matches ‘Who shot J.R.?'” SBC gave itself “a major shot in both feet” by proclaiming it initially would pursue “high-value customers” for video -- in effect declaring, “the first thing we're going to do is economically discriminate,” Brenner said. He also said he wonders how long it will be “before franchise authorities demand a cut” of video services over the Internet. No one spoke up for SBC or Verizon, though SBC was thanked profusely as the event’s meal sponsor. -- LT

--

The FCC’s E-911 order takes the “very draconian position” that VoIP providers must disconnect subscribers who fail to acknowledge formally their service’s emerging calling limitations, NCTA Senior Vp Dan Brenner said. He mused about the prudence of cutting off people’s phone service, sometimes unexpectedly. “This bears a lot of watching,” Brenner said.

--

The FCC order that will “end up in court first -- immediately” is Fri.’s imposing CALEA network requirements on interconnected VoIP service providers and facilities- based providers of DSL and cable modem service, said CompTel Pres. Earl Comstock. He told us later the FCC in effect is trying to override the statutory exclusion of “information services” providers from CALEA requirements applying to common carriers.

--

Peer-to-peer copyright infringement isn’t going away, said Marsha MacBride, NAB exec. vp-legal & regulatory affairs. It’s a “Whack-A-Mole” game, she said: “There are always going to be new technologies that challenge the law,” particularly to share movies. Congress will have difficulty in this area, at least for now, MacBride said. The NAB has “had a pretty good summer” compared with other sectors, thanks largely to introduction of the Ensign bill in the Senate, she said. MacBride said she’s not sure broadcasters care about imposing Title VI cable obligations on telcos as long as all their channels are carried, as telcos have promised to do.

--

Qwest is “very concerned about the mergers” in which SBC is taking over AT&T and Verizon is swallowing MCI, Newman said. It’s AT&T’s and MCI’s competition that forces SBC and Verizon to give competitors like Qwest the discounts it needs on special access services to compete out of region, she said. “We're talking to the FCC about those issues,” Newman said. “We're not talking to SBC and Verizon, ‘cause they're not talking about it.” She said Qwest is more flexible and open with competitors than other Bells: “Qwest is not SBC and is not Verizon.” She beseeched listeners not to lump her company in with “the RBOC bloc -- that ‘bad group of people.'” Meanwhile, Qwest’s Omaha, Neb., forbearance petition to the FCC has industrywide implications, she said. Cox has taken 50% of the market’s access lines and 60% of its residential lines, Newman said. Qwest hasn’t asked that the regulatory burdens of being considered the dominant carrier be laid on Cox -- but it has asked to be relieved of them, she said. The broader issue is “when do you declare success?” in opening the market to competition, Newman said.

--

Though the policy trend definitely is running in incumbents’ favor, CompTel Pres. Earl Comstock conceded, “Congress will step in… They probably will rewrite the statute,” though it “will probably take a number of years.” The Ensign bill reflects Bell interests by removing common-carrier obligations but charging the FCC with ensuring nondiscrimination and access to programming in video, he said. When the Bells find themselves in the role of competitors “they want oversight and nondiscrimination and access -- and that’s all the competitive industry has ever asked for.” The free market’s “invisible hand” is “mythical” as a force to replace regulation, Comstock said: “Where you have a true free market, you tend to have a monopoly.” Less than 10% of commercial buildings “have an alternative pipe” to the Bells, so CompTel believes “there has to be some sharing of that infrastructure” and opposes the AT&T and MCI takeovers. “We don’t have to hypothesize about the future; competition is going to become very difficult,” he said. Comstock pointed to independent ISPs’ experience trying to get in on cable modem service: “In 8 years, nobody has negotiated their way onto cable for a competitive service.” Cable resists cutting broadband rates in the face of deep telco discounting of DSL: “How’s that a competitive marketplace?” SBC fights municipal wireless but won’t meet the need itself, to avoid cannibalizing existing services, he said. Comstock also appealed directly to mercenary considerations: “The Federal Communications Bar Association has a very vested interest in keeping competition alive.”