As we move into the last half of 2014, we continue to be disappointed with the FCC’s failure to resolve so many of the key policy issues facing the industry. The issues are not new but continue to linger month after month, causing continued uncertainty. Here are the latest developments and what we can expect this fall and winter from the FCC:

The transition from the Time Division Multiplexed Network to the Internet Protocol (IP) network – The Commission continues to place its faith in AT&T’s “transitions experiment” in Florida and Alabama and has recently announced that it will select an outside neutral provider to analyze the data from the trial. In the meantime, AT&T is currently educating consumers in both locations about the changes they can expect to their services. Regarding end user customers, the Commission is concerned about a small number of consumers in West Delray Beach, FL who do not yet have substitute services identified or available. In response, AT&T pledged to not remove any current TDM services at least until mid-2015 while it develops a solution.

While the concern for end users is certainly appropriate, the Commission has been less than helpful regarding the status of wholesale customers during and after the transition. Despite continued lobbying by CLECs, the Commission continues to avoid taking a stand on whether IP interconnection must comply with the section 251 interconnection rules. In the absence of such a policy ILECs continue to offer to negotiate commercial agreements that CLECs have, for the most part, found to be unsatisfactory.

CLECs are also concerned about the Commission’s failure to require ILECs to have identified services readily available to replace special access in the IP network. Ethernet may help some wholesale providers, while others may choose to continue to use unbundled loops combined with their own networks. Unfortunately the Commission has not made clear what the ILEC unbundling requirements will be during and after the transition to IP.

Thus, while the AT&T trial may help the Commission feel confident about the IP transition for consumers, unless and until it addresses the important uncertainties for wholesale customers, it is impossible to see how the trial moves the industry closer to a successful IP transition.

Net Neutrality – This summer the industry will file its comments on the FCC’s new rulemaking that will determine the future regulation of the Internet. In response to political pressure, the Commission continues to suggest that it will not allow so-called “fast lanes” on the Internet. Such fast lanes would create a two-tier system, providing the “haves” with greater bandwidth speeds than the “have-nots.” Unfortunately, a two-tier system is a logical byproduct of the Commission’s current proposal to allow commercially reasonable agreements that could accept differential bandwidth speeds if some yet to be created factors are met. 

Conversely, if the Commission yields to political pressure and attempts to reclassify broadband Internet access as a telecommunications service to stop such fast lanes, it will ignite a firestorm of litigation with prospects of a court victory problematic. Moreover, based on the fact that reasonable discrimination is permitted for telecommunications services, it is doubtful that the Commission could stop economically justified bandwidth differentials even if broadband Internet access is regulated as a Title II telecommunications service. This fall, after the Commission digests the industry comments on this issue, it would be advised to stick to its commercially reasonable proposal and forget about reclassification.  While court challenges are inevitable, the Commission can best use its section 706 (Advanced Services) ancillary authority to construct rigorous factors to reject unreasonable discriminatory agreements on a case-by-case basis rather than triggering years of uncertainty with reclassification.    

Special Access Data Request - The Commission continues to wait for the Office of Budget Management to give it the go-ahead to initiate its massive special access data request which it will use to determine future ILEC special access regulation. There are several on-going concerns with this proceeding. First, there appears to be many small special access customers who continue to be unfamiliar with or do not collect much of the data the Commission plans on collecting. In addition, there is still uncertainty about the resources the Commission will have at its disposal to analyze the massive amount of data that will be filed.  After, all, collecting the data is not an end into itself. The goal is to actually use the data to develop an appropriate regulatory framework for ILEC special access services going forward.  With all these uncertainties, this proceeding has the chance to quickly become a mess if the Commission does not handle it carefully. 

Based on past history, it is unlikely that the Commission will get very far this summer on any of these issues. Thus, we could have a busy fall. The sooner the Commission address these issues the better it will be for everyone in the industry, especially smaller carriers who continue to get the short end of the straw when missing regulation is usurped by market power.

By Andrew Regitsky, President, Regitsky & Associates