Cable and IP telephony FCC's prime regulatory concerns

Published July 2nd, 2000 - 02:00 GMT

The Federal Communications Commission (FCC) is working to develop policies on a number of pressing telecom issues, including open access, Internet Protocol (IP) telephony and inter-carrier compensation, FCC chief William Kennard said on Friday.  

Kennard said the FCC has recently been faced with several difficult "first impression" issues that are changing the regulatory landscape of the agency and the marketplace.  

The most important of these concerns, Kennard added, is the issue of "open access," or whether or not to require cable companies to open up their communications networks to any and all Internet service providers (ISPs).  

Last week, a Ninth Circuit Court of Appeals determined that local authorities in Portland could not force top cable company AT&T to open its network to rivals, saying that only the FCC had jurisdiction over the matter.  

In the course of its decision, the court determined that high-speed Internet service delivered over cable lines constitutes a "telecommunications service" because of its two-way functions, and is therefore subject to federal control. That distinguishes it from one-way cable TV service regulated by a city or other local authority, according to the court.  

AT&T has said it would allow other Internet companies onto its network, but not until 2002 when it ends an exclusive arrangement with online provider [email protected].  

The FCC has yet to conclude that cable Internet service is a "telecommunications service." Faced with the court decision, the commission is planning a proceeding to look at the matter and collect information on the marketplace.  

"We don't want to get into a situation where people are rushing to judgment or rushing to enforce legal obligations that really haven't been fleshed out yet," Kennard was quoted as saying by The Associated Press. "It's become clear to me that the FCC will have to address the issues raised by the court."  

The FCC's review could have implications for the long-running debate over whether cable Internet providers must give other online companies access to their lines. So far, the commission has declined to impose such a requirement, fearing that any regulation would slow the growth of the emerging market of these super-fast Web services.  

A lower court ruling last year had given the City of Portland authority to force cable companies to give other ISPs access to the cable network.  

Kennard said that the court's decision made it clear that the FCC would have to decide whether to categorize cable broadband as telephony and whether to subject it to the many rules by which telcos must abide.  

Either way, a national broadband policy would be forthcoming in the near future, he said, even if such a policy only detailed where regulatory action is necessary and where it is not. 

The FCC chairman has said many times that he would prefer to see -- and is optimistic that consumers will get -- a market solution to the open access debate.  

Kennard, long an advocate of a hands-off approach toward cable online service, said that despite the court's ruling, the FCC has flexibility in crafting national policy. And even if the commission ultimately decides that cable Internet service is a telecommunications service, it still could hold off from applying the old regulations used to break up the phone monopoly.  

"Calling this a telecommunications service doesn't mean that it invokes all of the traditional telephone regulations. It just establishes a certain framework," said Kennard. He added the court made it clear that the FCC has the authority not to impose regulations.  

The FCC chairman said he also had his eye on the developments in IP telephony and wireless devices, and said the impending technologies would bring about a "paradigm shift in the marketplace that's going to put a lot of pressure on the existing regulatory structure." 

Kennard added that the commission was actively studying the issue, and was keen on providing some guidance on access charges on IP telephony and the issue of reciprocal compensation.  

The House of Representatives recently passed a bill that would leave the door open for levying access charges for voice telcom services over the Internet. Rep. Edward Markey, D-Mass., has proposed legislation exempting the fledgling technology from access charges.  

Under so-called "reciprocal compensation" agreements, local telephone companies must pay each other a fee for every one of their customers who places a call to a customer of the other local company. Incumbent local exchange carriers (ILECs) like Bell Atlantic have backed legislation in the House to repeal such agreements, claiming new competitive local exchange carriers (CLEC) have made a killing off the baby Bells and other ILECs. Because some of their largest customers are Internet service providers, and because the ISPs house multiple modems for dial-up connections, the CLECs rarely have customers making outgoing calls, and pay very little in reciprocal compensation fees. However, since they almost always take calls in, they have made piles of cash from the deal.  

Kennard said he was distressed by several bills in Congress that would severely limit the resources and power of the FCC. The House wants to strip a significant portion of the commission's fiscal year 2001 budget, and earlier this week, a House Commerce subcommittee approved a bill that would restrict significantly the FCC's merger review authority by cutting the time allotted for reviewing merger applications to a maximum of 90 days.  

"I think the funding bill would be devastating to the agency," Kennard said. "It's very important to this new economy that the FCC has the resources and the brainpower to address these difficult issues and mergers.  

"Budget issues should be considered as such, and policy issues should be considered policy issues," Kennard said. "There's a debate about the FCC's merger authority and I think that debate is appropriate in the context of legislation, but not to try to circumvent that process by pulling away our resources."  

Kennard added that most mergers are handled within 180 days, and that the merger review legislation would have the unintended consequence of forcing more merger reviews to be held behind closed doors -- without public comment -- and to be denied outright.  

"That's what we're seeing happen in the European Union," he said. "They are on very short time frame and as a result of [their four month review period] the EU just tends to say 'no,' because these mergers raise lots of complex issues that have to be worked through, not only with regulators, but with the public as well" -- (Various Sources)

© 2000 Al Bawaba (

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