FCC Helps Verizon's Enterprise Game
MARCH 22, 2006
http://www.lightreading.com/document.asp?doc_id=91238&print=true
People in Washington Tuesday were still weighing the potential effects of
the Federal Communications Commission (FCC) 's broad deregulation of
Verizon Communications Inc. (NYSE: VZ - message board)'s enterprise
broadband business.
Verizon had asked for the regulatory relief in a petition dating back to
2004. The commission faced a Sunday deadline to grant or deny the petition,
but commissioners were bitterly divided on their decision. When time ran
out, Verizons petition was deemed granted by order of law, under FCC
operating procedure.
Verizon was immediately excused from a host of regulations in such areas as
pricing, privacy, and the unbundling of enterprise broadband facilities.
(See Verizon Gets FCC Relief.)
Various industry groups lined up Monday and Tuesday to gauge the effects of
the petition grant on the enterprise market, and generally get their licks in.
Critics of the FCC's inaction said Tuesday the commission now has left
Verizon's large enterprise business almost completely unregulated. The
government, they say, now has little control over contributions to the
Universal Service Fund (USF) from Verizon's enterprise revenues, its
enterprise broadband pricing, or its facilities unbundling practices.
Smaller, regional carriers have perhaps the most to lose from Verizon's new
regulatory freedoms. The CLECs' interest group, COMPTEL, was predictably
upset at what looked to them like a gift from Little Kevin to Uncle Ivan.
"The Chairman's action yesterday represents the height of irresponsibility
by a federal official," said COMPTEL CEO Earl Comstock in a prepared
statement. "As a result, competition and consumers are now at the mercy of
Verizon's financial self-interest."
The passage of Verizon's request is the latest in a string of broadband
deregulation actions by the FCC. The commission last August ruled that
carriers no longer must share their consumer broadband facilities with
competitors. Verizon has now won similar relief, among other things, for
its enterprise broadband facilities. (See FCC Zaps Broadband Carriage Regs.)
Verizon was naturally pleased at its good fortune. The impact of this
petition, which became effective today is that outdated regulation on
broadband services is lifted allowing greater flexibility in offering
sophisticated high-capacity services in the highly competitive enterprise
market, Verizon regulatory affairs VP Susanne Guyer said in a statement
Monday.
Since the FCC didn't issue an order, the exact effects of the petition
grant depend in large part on Verizon. If Verizon were to take to extremes
its relief from regulation, it could stop paying a portion of its
enterprise revenue into the USF, sources say. Notably, Verizon pledged in a
February letter to the FCC that it would continue paying USF fees on its
enterprise revenues.
More likely, Verizon is more free to deny competing CLECs, cable, and
wireless providers access to its high-capacity metro access rings. Verizon
also no longer must file its high-capacity service rates with the FCC,
freeing it to charge enterprise customers on an account-by-account basis.
The granting of Verizons petition is all about Verizons competitiveness
in the enterprise market against the backdrop of a rapidly consolidating
telecom industry. (See Ma Bell Is Back!.)
Verizon claimed in its petition that competition is fierce in the
enterprise market, and that smaller carriers have the advantage because
they are relatively unregulated. Verizon claimed to need relief from
pricing and unbundling requirements in order to compete effectively.
The losers in all this may be the large enterprises that buy Verizon's
high-capacity services. I can tell you that for the people who actually
have to go out there and buy services, its not competitive, says Colleen
Boothby, a Washington attorney representing a consortium of large corporate
telecom buyers called the AdHoc Telecommunications Users Committee (AdHoc).
Boothby says prices for high-capacity services have been going up steadily
over the last few years as the Bells seek more revenues from the enterprise
segment. UBS AG analysts estimate that the high-capacity service market
represents roughly a $14 billion business for the Bells -- $5 billion for
Verizon, $5 billion for AT&T Inc. (NYSE: T - message board), $2 billion for
BellSouth Corp. (NYSE: BLS - message board), and $2 billion for Qwest
Communications International Inc. (NYSE: Q - message board).
Meanwhile competition from CLECs and cable companies has been insufficient
to control prices, Boothby says.
Boothby says her organization would be the first to ask for deregulation if
competition was vibrant in the high-capacity services market. Every time
they deregulate them the price goes up, and were kind of sick of that
because the prices have been going up steadily, she says.
Others believe the competitiveness of the enterprise market is exactly why
Verizons request for deregulation was allowed to go through. The
Verizon/MCI business unit is basically getting its ass kicked by all these
other little guys that can basically sell at basically any rate, and since
they have lower overhead they can charge those lower rates and still make
money, says Hunter Newby of the voice peering company telx Group Inc. .
So Verizon basically had to shed some of those obligations to fund rural
and USF-type telephone service plans, and the funding for that was tied to
the tariffed rates, Newby says.
Regardless, many commission watchers and some inside the commission are
surprised at the curious way Verizons request for forbearance was granted.
As time was running out to grant or deny Verizon's petition, Chairman Kevin
Martin circulated a draft order that would have relieved Verizon of some
but not all of the regulations on its enterprise broadband business.
Martin apparently agreed that Verizon deserved to be freed of certain
rules, but did not want to relinquish all regulatory control.
But Commissioners Copps and Adelstein bitterly disagreed with Martin's
sympathetic approach to Verizon, and promised to vote against the order. So
Martin pulled back his draft order rather than bringing it to a vote in
which he had no chance of winning a majority.
With no order issued, Verizon won a broad deregulation of its high-capacity
line business for enterprises.
No doubt in the days and weeks ahead this Commission will be compelled to
seek promises from the petitioner and issue follow-on orders in a
reactionary attempt to clean up the wreck, Commissioner Copps wrote in a
statement Monday.
Such are the costs of this abdication of our responsibilities, Copps
wrote. It is unfortunate that consumers are the ones who will pay the price.
Mark Sullivan, Reporter, Light Reading
--~--~---------~--~----~------------~-------~--~----~
TELECOM-CITIES
Current searchable archives (Feb. 1, 2006 to present) at
http://www.mail-archive.com/[email protected]/
Old searchble archives at
http://www.mail-archive.com/[email protected]/
-~----------~----~----~----~------~----~------~--~---
