The Telecoms Twilight Zone: Navigating the Legal Morass Among the Supreme Court, the D.C. Circuit, and the Federal Communications Commission
Lawrence J. Spiwak
Phoenix Center for Advanced Legal & Economic Public Policy Studies
Phoenix Center Policy Paper No. 13
Given the conflicting characteristics of the telecoms business - i.e., huge dollars at stake on the one hand but the inherent "public utility" characterization of the industry on the other - public policy decision-making can often take on a surreal quality. After the events of the first half of 2002, however, the politics of telecoms are becoming just plain weird. First, the Federal Communications Commission (FCC) announced a new broadband initiative and releases three Notices of Proposed Rulemaking (NPRMs) and one Notice of Inquiry, all ostensibly designed to provide investors with sufficient regulatory clarity so as to lead to more advanced broadband deployment. Rather than focus on how to promote new entry and mitigate incumbents' market power for the "last mile", these "Four Horsemen of the Broadband Apocalypse" so nakedly seek to benefit incumbent monopolists exclusively that they collectively act as a proposal by the FCC to abandon the pro-competitive provisions of the Telecommunications Act of 1996.
Shortly thereafter, the Supreme Court in Verizon et al v. FCC clearly upheld the FCC's forward-looking "Total Element Long-Run Incremental Cost" ("TELRIC") methodology for unbundled network element ("UNE") pricing and other unbundling rules. The Verizon decision finally put an end to nearly seven years of Regional Bell Operating Company ("RBOC")-driven litigation surrounding the Telecommunications Act of 1996. More importantly, however, the Court made several important findings of law and fact (including, inter alia, that the Bells are monopolists for the "last mile" and, as such, Congress specifically decided to treat Competitive Local Exchange Carriers or "CLECs" and RBOCs differently) that rips the analytical heart out of the RBOC arguments against the Act - and, by extension, the FCC's current "inter-modal" broadband initiatives. Less than a fortnight after the Supreme Court finally resolved these issues conclusively in Verizon, the D.C. Circuit issued its opinion in United States Telecom Association et al. v. FCC, which significantly handcuffed the FCC's ability to identify network elements that incumbent local exchange carriers (ILECs) must unbundle pursuant to the 1996 Telecom Act. In a startling act of judicial activism, the D.C. Circuit cited Supreme Court Stephen Breyer's dissent from AT&T Corp. v. Iowa Utilities Board repeatedly and virtually ignored the Supreme Court Majority's rejection of RBOC anti-unbundling arguments in Verizon. In both in terms of analysis and factual conclusions, therefore, the USTA decision appears to ignore deliberately the Supreme Court's holding in Verizon made less than two weeks earlier.
These two widely inapposite cases place the FCC into the "Telecoms Twilight Zone" from any conceivable perspective: legally, economically and, of course, politically. On one hand, the Supreme Court's Opinion in Verizon simply confirms the obvious: the FCC's proverbial "Four Horsemen" - if adopted as currently proposed - are patently antithetical to the maximization of consumer welfare and must be revised. On the other hand, the D.C. Circuit's Opinion in USTA appears to give the FCC the perfect legal and political cover to adopt the anti-unbundling agenda of the RBOCs. This Policy Paper examines both the Verizon and USTA decisions, and argues that if the FCC truly is in favor of less government and a market economy, therefore, then the FCC must demonstrate by both word and deed that the problem remains one of monopoly and not the lack of regulatory certainty.
Number of Pages in PDF File: 33
Keywords: Telecommunications, Competition, Unbundling, 1996 Act
JEL Classification: K23, L10, L50, L96, O33, 038working papers series
Date posted: February 18, 2004
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo6 in 0.407 seconds