FCC to Qwest: Forbearance a No-Go
For the second time this year, the FCC has dealt a blow to a Bell company seeking forbearance from rules that regulate pricing for competitive network access. But the carrier in question — Qwest Communications International Inc. (Q) — said its request was warranted and vowed that it will try again.
The FCC on July 25 voted 5-0 to deny Qwest’s long-pending request for relief in four major markets: Denver, Minneapolis/St. Paul, Phoenix and Seattle. Qwest wanted relief — mirroring what it received in Omaha, Neb., in 2005 — from network sharing and other obligations in those cities. But commissioners didn’t buy the argument that the RBOC faces so much competition in the markets in question that it needs freedom from certain government regulations. Chairman Kevin Martin said he thinks “significant competition” exists in Phoenix, but there wasn’t sufficient evidence overall to merit forbearance.
However, he added in a prepared statement, “As competition in these markets continues to develop, I am happy to re-evaluate these markets based on updated market facts.”
Shirley Bloomfield, senior vice president of Qwest Federal Relations, disagreed with the FCC’s assessment. “Competition in the telecommunications marketplace envisioned by Congress and the FCC is here. Based on precedent established by the FCC in its order addressing recent Verizon forbearance petitions, Qwest proved that a grant of forbearance was warranted,” she said. “We will continue to seek this regulatory relief.”
That promise didn’t set well with CLECs, which have battled the Bells’ various forbearance petitions as a group and as individual companies. Still, they were ecstatic over the news that the FCC rejected Qwest. For its part, XO Communications — the CLEC that spearheaded much of the resistance, mobilizing about 30 of its peers to lobby for denial — called Qwest’s evidence and arguments for forbearance “premature.” The FCC’s action “sends a strong message to Qwest and all Baby Bells that attempt to end-run the Telecommunications Act,” said Heather Burnett Gold, senior vice president of external affairs for XO, in a press release.
Other CLECs agreed. “The steady stream of anti-competitive Qwest and Verizon forbearance petitions flowing into the FCC creates an ever-present risk of higher prices and less choice for telecommunications consumers nationwide,” said Bill Weber, chief administrative officer for Cbeyond. “We are thankful to the FCC for holding the line this time, and we hope that it will continue to do so in the future.”
Integra Telecom and tw telecom Inc. issued similar statements.
Each of those companies, among others, relies on UNE access for DS0, DS1 and DS3 loop and transport elements at regulated rates. “Any UNE deregulation in these markets would have put these carriers at risk of losing share in the enterprise market long-term. If granted, even in part, this petition would have provided Qwest with more leverage over its competitors,” noted Medley Global Advisors’ telecom analyst Jessica Zufolo.
Studies commissioned by CLECs earlier this year showed Qwest’s bid for deregulation would have created $1.14 billion in higher charges each year for customers in Denver, Minneapolis/St. Paul, Phoenix and Seattle.
The Qwest denial came just months after the FCC also unanimously shot down Verizon Communications Inc.’s similar forbearance petition, which would have applied to six key metro areas in the northeastern United States. The problem is Verizon has two more requests for UNE relief pending for Virginia Beach, Va., and, except for the Block Island metro area, the entire state of Rhode Island. It’s unknown whether Martin will try to address those petitions before the end of the year.
Still, the FCC’s rejection of Qwest buys competitive providers some time. Pressure from Congress and the industry prompted the FCC late last year to issue a notice of proposed rulemaking to examine the purpose and use of forbearance petitions.
Congress included forbearance in the 1996 Telecom Act as a way for companies to get out from under onerous rules if they indeed were at a competitive disadvantage. Many in the competitive industry claim that the Bells are abusing the forbearance provision, while the RBOCs say they face intense pressure from CLECs and wireless, VoIP and cable providers.
Commissioners rejected Qwest’s plea just shy of the midnight deadline on July 25, narrowly avoiding the petition’s automatic approval as happened with Verizon two years ago.
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