In a political move likely designed to appease competitive telecom carriers, FCC Chairman Michael K. Powell sent a letter to Capitol Hill lawmakers requesting more enforcement authority against the ILECs.
“In my discussions with competitive local exchange carriers,” Powell said, “they cite enforcement as the key area for increased regulatory effort.”
Powell recently has been depicted in Washington as having a laissez-faire approach to Bell rivals as he holds true to his stance that the marketplace should decide the telecom winners and losers. Several sources, though, claim that regulatory intervention is the only way to sustain the intent of the Telecommunications Act of 1996 and to give CLECs a fair chance in the marketplace.
Powell, a Republican, sent a letter to the leaders of the Senate and House Commerce and Appropriations Committees late May 4 requesting increased authority in enforcement actions against the ILECs for violation of local competition provisions of the Telecom Act.
“In my view,” Powell wrote, “the difficulties currently facing the CLEC industry stem from a variety of conditions. Investors who were previously optimistic about the business plans of certain CLECs have – and sometimes inexplicably – turned cold on those plans at the very time that they have begun to bear fruit.”
Although there are examples of CLECs with workable plans, Powell continued, other CLECs appear to have steadfastly adhered to business plans that show little or no promise of profitability.
“And in some cases, CLECs may have been stymied by practices of incumbent local exchange carriers that appear designed to slow the development of local competition,” Powell wrote.
Powell specifically wants legislation increasing the maximum fine from $1.2 million to $10 million. Under Section 503(b)(2)(B) of the act, the FCC can fine common carriers for any single continuing violation of the act or the commission's rules up to $1.2 million.
“Given the vast resources of many of the nation's ILECs, this amount is insufficient to punish and to deter violations in many instances,” Powell said in his letter. “Congress should consider increasing the forfeiture amount to at least $10 million in order to enhance the deterrent effect of commission fines.”
Powell also asked for longer statute of limitations for forfeiture actions against common carriers. It is currently set at one year from the date of the alleged violation. He also asked that the FCC be given authority to award punitive damages, attorneys’ fees and costs in formal complaint cases filed under Section 208 of the Telecom Act.
But is this goodwill gesture too late? Five years after the Telecom Act was signed into law, competitors have conquered only 8 percent of the nation’s local phone lines.
“We agree that the FCC needs stronger enforcement authority, and we are pleased that Chairman Powell has asked for such additional authority,” said Jonathan Askin, general counsel for the Association for Local Telecommunications Services (ALTS) (www.alts.org).
“Like an 8-year-old with a new baby sitter, the ILECs are trying to see what they can get away with under the new FCC,” Askin says. “If the ILECs are going to take their obligations seriously, it is critical that the FCC send a strong signal to the incumbent carriers that the FCC will not tolerate continued ignorance of the market-opening obligations of the Telecom Act and the FCC's implementing rules.”
Focal Communications Corp. (www.focal.com), a broadband communications provider based in Chicago, fully supports the FCC’s request for authority to impose higher fines.
The fact SBC Communications Inc. (www.sbc.com), for instance, has paid more than $23 million in fines rather than comply with the merger conditions from its purchase of Ameritech Corp., demonstrates that current fine levels don't deter anticompetitive behavior by the incumbents, says Richard J. Metzger, Focal’s vice president of regulatory and public policy.
“But making sure the sheriff has a gun solves only part of the problem,” Metzger says. “If an empowered FCC is willing to let the bad guys alibi their way out of every situation, we still won't see much law and order on the telecom frontier.”
Powell wrote in his letter that, “a vibrant CLEC industry is central to Congress's vision for opening local markets to competition.”
