Posted: 10/1999
FCC May Regulate CLEC Access Charges
By Jonathan E. Canis
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On August 27, 1999, the Federal Communications Commission (FCC) released its order adopting rules that provide additional pricing flexibility to incumbent local exchange carriers (ILECs). That same order also establishes a rulemaking proceeding that will consider whether the FCC should regulate competitive LEC (CLEC) access charges. It seems a cruel irony that, at the same time the FCC is taking major deregulatory action on behalf of ILECs, it is considering establishing an unprecedented new form of regulation on competitive carriers.
Substantively, the FCC order raises a number of questions on issues ranging from petty annoyances to major new regulatory burdens on CLECs, for example:
* Are CLEC access charges too high, and should they be regulated? This question is based on a false premise. Some parties simply compare CLEC access charges (often 4 to 7 cents) with ILEC access charges (generally ranging from 1 to 2 cents) and conclude CLEC rates are unreasonable. This comparison does not consider the flat-rated access charges, universal service subsidies, special access surcharges, and other fees the ILECs collect along with their per-minute charges. When these are added in, the gap between CLEC and ILEC per-minute rates narrows considerably.
* If regulation is necessary, what form should it take? The ironic thing here is that, when the FCC gave ILECs pricing flexibility, it reasoned if the ILECs establish unreasonable rates, CLECs can challenge them by filing a formal complaint. At the same time, the FCC completely ignored that customers with a beef against CLEC rates are also fully capable of filing a formal complaint.
* Should the FCC force CLECs to withdraw their tariffs? The FCC has been trying to do this for years, but has been held up in litigation. Forcibly removing CLEC tariffs would increase costs by requiring individual contracts, and likely increase the need for extensive negotiations with customers.
Procedurally, the FCC action is odd. The FCC has two main methods of conducting proceedings that result in new rules. One is the Notice of Inquiry (NOI), in which the FCC simply asks a bunch of questions to determine whether a problem exists that merits regulation, and whether new rules are needed to address the problem. The other is the Notice of Proposed Rulemaking (NPRM), in which the FCC typically lists a bunch of tentative conclusions and recommended rules and seeks comment on whether they should be adopted. In this case, the FCC order looks, walks and talks like an NOI--there are virtually no tentative conclusions and no proposed rules--but is styled like an NPRM. Apparently, the FCC has taken this unusual (and possibly procedurally flawed) action to expedite matters: a NOI is usually followed by an NPRM, which together can take two years to complete. By going right to the NPRM, the FCC could conceivably establish rules in six to 12 months.
Here's hoping the NPRM does not signal the FCC's intent to rush into a costly and disruptive new regulatory scheme for competitive carriers. The anticipated slugfest will start in October, as parties file their initial comments with the FCC.
