Since Donald Trump became President the FCC has been operating with only three commissioners. And while that has not stopped the agency from taking important action on contentious issues such as net neutrality and business data services (BDS), that is not the natural order of things. By law, the Commission must have five commissioners, three from the party that holds the presidency.

The Commissioner deficiency is about to end as Trump has nominated Brenden Carr to be the third Republican commissioner while re-nominating Jessica Rosenworcel to be the second Democrat.

Carr is currently the FCC’s general counsel and is reportedly very close to Chairman Ajit Pai. Before becoming general counsel, he had served as Pai’s wireless, public safety, and international legal adviser. He also worked as an attorney at the firm Wiley Rein and represented telecom companies such as AT&T, Verizon and two trade associations, USTelecom and CTIA. There is little doubt he would be a strong ally of Chairman Pai on most important issues.

In June, Trump re-nominated Rosenworcel for the Commission after her original five-year term ended in January. She has been a strong advocate for keeping the 2015 net neutrality rules in place, but may find common ground with the Republicans on efforts to make broadband more available in rural areas.

Both individuals are partisan, and their hearings in the Senate are expected to be extremely contentious. Thus, it is expected that the Senate will review both nominees together as a package deal to smooth the way for their confirmations.

With the Commission expected to be at full capacity by summer’s end, the fall should be very interesting. Industry comments are due on July 17th regarding the FCC’s proposal to eliminate many of the open Internet rules the Commission created in 2015. Reply comments are due on August 1th. An order could come soon after Labor Day. While we know that the order will include the elimination of both Title II regulation and the “future conduct” rule which enables the Commission to control every aspect of ISP behavior, we are still in the dark regarding the fate of the Internet “bright line” rules of no blocking, throttling or paid prioritization of traffic. Regardless of the outcome, the side that loses will appeal to the DC Circuit Court, with the case eventually winding its way to the US Supreme Court.

The FCC’s Business Data Services Order will take effect on August 1, 2017. In that Order, the Commission largely deregulated ILEC DS1 and DS3 special access services using a highly suspect competitive market test, in which just the presence of a cable company was enough to classify a market as competitive. On June 23, 2017, Windstream Services, LLC, Ad Hoc Telecom Users Committee, BT Americas, Inc., and INCOMPAS filed a Motion for Stay Pending Judicial Review with the FCC, asserting that if the Commission failed to act by June 30th, it would take that inaction as a denial of the Motion. Not surprisingly the Commission did not take any action. Thus, the Petitioners have now sought a stay with the Eighth Circuit Court of Appeals. In their Motion for Stay filed with the FCC, they note that:

The extensive deregulation that will result if the new rules take effect will permit the incumbents to squeeze their competitors by raising prices for essential inputs to their services. It also would cause substantial harm to businesses, especially smaller businesses in suburban and rural areas that rely on access to BDS at or below 50 Mbps, as acknowledged by the U.S. Small Business Administration. And the Order will allow ILECs to de-tariff their BDS services on August 1, 2017, and to replace discontinued BDS with higher-cost alternatives, creating the prospect of enormous disruption and uncertainty as the industry migrates to a new paradigm of Commission indifference to competition. As the attached declarations show, the economic losses that businesses and competitive carriers will suffer if the rules take effect would be massive, imminent, and unrecoverable. A stay pending appeal will serve the general public, who under the Order will be condemned to suffer the usual results of monopoly markets: higher prices, less output and lower quality. (Petition for Stay, pp. 3-4).

The Petitioners have also requested that the case be transferred to the DC Circuit Court which has far more experience than any other appeals court in reviewing complex FCC issues. Not coincidently, that Court is now heavily Democratic and might find the BDS Order too deregulatory for its tastes.  

Regardless of the court that hears the case, there is no question that this fall will find the industry and the FCC, immersed in a bitter legal battle over the future BDS rules.    

The issue of 8YY calls will also be highlighted this fall. As we recently discussed in our June 2, 2017 blog found here: www.ccmi.com/blog/the-fcc-must-complete-toll-free-8yy-access-reform, 8YY calls are steadily becoming an arbitrage issue for the industry. For the last few years 8YY call providers have been assessed originating access minute charges even though the carrier responsible for the call is on the terminating end. This has progressively become problematic as only terminating minutes have moved closer to $0.00 as part of the transition to bill-and- keep.

That is why, in a May 29, 2017 ex parte filing, Ad Hoc requested the Commission to reinstate its previous position and once again assess terminating access charges on the 8YY provider. In response, in a June 27, 2017 Public Notice, the FCC wants to refresh the record on 8YY calls. Industry comments are due on July 31, 2017, while reply comments are due on August 15, 2017 in Docket 07-135. The Commission states:

In light of the developments that have occurred in the relevant markets since the 2011 ICC Transformation FNPRM, including the transition of certain terminating switched access rates to bill-and keep, and any changes in 8YY traffic volumes, we seek to refresh the record on 8YY access charges. For example, we seek comment on whether we should adopt a distinct resolution for 8YY originating traffic and how such a resolution would be implemented. We encourage commenters to submit updated data on the relative proportion of 8YY originated minutes to traditional originated minutes to support any proposed resolution. We also invite parties to address other 8YY-related intercarrier compensation issues raised in the record of the 2011 ICC Transformation FNPRM and to update the record on 8YY-related developments that have occurred since the release of the 2011 ICC Transformation Order.

A decision on this issue is expected before the end of the year.

The Commission is on a determined march to deregulate the telecom industry as quickly as possible. This fall will be a battleground for both net neutrality and BDS. It will be interesting to see what impact, if any, the new commissioners will have.

By Andy Regitsky, CCMI