FCC Antitrust Highlights

  • The FCC announced on Tuesday, September 27, 2005 that it will not require Internet telephone companies to disconnect customers who have not acknowledged limitations in the emergency-911 dialing capabilities of Internet telephony. Demonstrating flexibility after imposing a hard-line requirement that providers of voice-over-Internet protocol (“VoIP”) obtain replies from all customers by September 28, 2005, the FCC said no customer cut-offs will be required of companies with 90 percent compliance. Attention to the issue among VoIP providers now is likely to turn to what they say is a more daunting challenge: They must provide location-based, or “enhanced 911”, capability to 100 percent of customers by November 28, 2005. “In the end, our focus has always been on making sure that [Internet protocol] technologies offer the capability to customers that when they pick up the phone and dial 911, they get to get an emergency operator,” FCC Chairman Kevin Martin said in an interview after Senate Commerce Committee hearing testimony. “The notification issue – telling people it doesn’t work – was always secondary to making sure that the technology did work,” he said. The public notice released Tuesday “recognizes that great progress has been made by VoIP providers,” said Jim Kohlenberger, executive director of the Voice on the Net (“VON”) Coalition, which represents Internet telephone companies. Twenty-one VoIP providers obtained 100 percent acknowledgement from their customers, and 32 providers reached 90 percent. More than 27 providers did not reach 90 percent, according to the FCC. “In recognition of these substantial efforts and the very high percentage of received acknowledgements, the FCC’s Enforcement Bureau announces that it will not pursue enforcement action against such providers.” Companies not at 90 percent compliance have until October 25, 2005 to submit status reports. The notice said no enforcement action will be taken until October 31, 2005.
  • On September 23, 2005, the FCC released rules for the newly “deregulated” providers of high-speed Internet service over digital subscriber lines and mandated that they and Internet telephone companies design their networks to facilitate surveillance by law enforcement. The FCC issued two separate orders: One declared that broadband over DSL provided by telecommunications companies is now an unregulated “information service.” The other order requires all broadband and companies capable of being linked to the public-switched telephone network to help law enforcers implement wiretaps. The decision to push DSL into the generally less regulated category of information service under telecom law was occasioned by the June 27 Supreme Court decision in National Cable and Telecommunications Association v. Brand X Internet Services. That ruling upheld the FCC’s declaration that broadband over cable modems is an information service, not a more heavily regulated “telecommunications service.” Friday’s FCC orders were supplemented by a three-page policy statement restating the agency’s commitment to “network neutrality,” or the notion that broadband providers allow consumers to access any legal content, applications or devices.
  • On September 23, 2005, the FCC granted a Verizon Communications’ request for pricing flexibility on advanced Internet-based services. According to the FCC, “the services for which the waiver is granted are referred to by Verizon as ‘fast-packet’ services, and comprise packet-switching equipment and facilities that reach enterprise customers through dedicated special access lines to form high-capacity data networks.” The decision affects broadband services to businesses. Verizon was pleased by the decision, but not Earl Comstock, CEO of CompTel/ALTS, an association of Bell competitors. “We are disappointed that the FCC is once again granting a Bell request to limit the scope of competition in this country. Without requiring Verizon to prove that enterprise customers have competitive alternatives, the FCC granted Verizon authority to charge monopoly rates without fear of government oversight.” The relief for Verizon comes on top of FCC’s order last Friday relieving Qwest Communications of certain restrictions on monopoly providers in Omaha, Neb.
  • On September 22, 2005, a group of competitive local exchange carriers asked the FCC to grant market remedies before it blesses the mergers of AT&T with SBC Communications and MCI with Verizon Communications. During a news conference, the companies — Broadview, BridgeCom, Conversent, Eschelon Telecom, NuVox, TDS Metrocom, Xspedius and XO Communications — asked the agency to condition the mergers in a number of ways, including requiring SBC and Verizon to lower and freeze wholesale access rates, grant current customers the chance to cancel contracts and drop limits on the use of certain local lines. The group of companies has consistently asked regulators to deny the mergers outright, but the FCC appears to be moving quickly to approve them. All of the companies are dependent, to varying extents, on renting local high-speed lines to reach their customers. They fear those rates will skyrocket after the mergers. An SBC spokesman said, “It is not much of a surprise that eight of our competitors have now pivoted from trying to stop the approval of the SBC-AT&T merger to starting a lobbying campaign to saddle the combined SBC-AT&T with onerous, unnecessary regulatory obligations. Our merger review remains on track, as evidenced by the state of New York’s unanimous approval without conditions.”
  • On September 12, 2005, FCC Chairman Kevin Martin has asked agency staff to draft orders approving two big telecommunications mergers — AT&T with SBC Communications and MCI with Verizon Communications, AP reports. FCC officials declined comment. Early September marked 180 days that the agency has been considering the AT&T, SBC merger, and in a public notice, the agency said it had “stopped the clock” until Oct. 13, one day after the FCC’s October monthly meeting. The notice said the firms requested that the agency’s “information time clock for consideration of the transaction be stopped,” and the FCC described it as an “informal benchmark” for meeting merger-approval decisions. The agency “retains the discretion to determine whether, in any particular review proceeding, events beyond the agency’s control, the need to obtain additional information or the interests of sound analysis constitute sufficient grounds to stop the clock.”

Authored by:

Gregg Mendenhall

202-218-0025

gmendenhall@sheppardmullin.com