FCC Triennial Review Likely a Prelude to Litigation

An appeal is highly likely once the Federal Communications Commission (www.fcc.gov) issues an order governing a local telephone resale platform that has sparked a nationwide debate packed with rhetoric and lopsided views.

The FCC could issue its order in February after it completes it Triennial Review, but lawyers say in all likelihood the agency will not be the final word on the unbundled network element – platform (UNE-P).

“I would say under virtually any scenario . we are probably talking about a multiyear process before which whatever rules we end up with would be final” and not be appealed, said Genevieve Morelli, a telecom lawyer for Kelley, Drye & Warren LLC (www.kelleydrye.com) and the spokesperson for the UNE-P-centric PACE (Promoting Active Competition Everywhere, www.pacecoalition.org) Coalition.

An Appeals Court decision could take a year or more, and that decision could be appealed to the Supreme Court. Furthermore, a Supreme Court decision could take more than a year if the judges decided to hear the case, Morelli said.

If an Appeals Court reversed part of the FCC’s order, that order also could be sent back to the government agency, the lawyer said.

Once the FCC makes its decision, parties could seek to stay the order until an Appeals Court made a ruling. Under the law plaintiffs must prove there would be “irreparable harm” short of a stay, Morelli said.

Brad Ramsey, general counsel of the National Association of Regulatory Utility Commissioners (www.naruc.org), said it is likely an appeal would go before the U.S. Court of Appeals for the D.C. Circuit.

“In the best of all possible worlds no matter what the order is you are looking at two years to two years and six months before the minimum litigation is completed,” Ramsey added. “The more specific the order is, I think, the greater the prospect for reversal.”

The UNE-P platform has created perhaps the largest telecom-related regulatory dilemma for the FCC this year. Facing increasing competition in the local phone market, the Bell companies are seeking to remove the UNE-P because they say it requires them to lease their local networks to rivals at a loss and discourages investment in new technology.

Competitors say they need access to the platform until they can gain enough customers in an area to justify a network investment. In fact, rivals of the Baby Bells said Wednesday residential and small business customers as well as incumbent central offices used to link the telephone lines to them are so dispersed that they hinder phone competitors from achieving enough scale to justify an investment.

But Dorothy Atwood, senior vice president for federal regulatory strategy at SBC Communications Inc. (www.sbc.com), the No. 2 local phone provider, balked at that argument, noting that competitive switches have been deployed at most of the company’s facilities.

Consequently, SBC is seeking to remove switching from the platform on a nationwide basis. If the FCC found justification for the incumbents’ argument that phone companies are not impaired without switches and removed them, CLECs are likely to appeal the decision. 

Lawyers say the Bells also are likely to litigate unless they get what they are asking for.

But there is another powerful group likely to join the fray if the FCC issues national rules that leave state utility commissioners out of the decision-making process: the states, themselves. State regulators, who set the prices for particular network elements such as loops and switching under the UNE-P, insist they should play a role in determining where phone companies are  –  and are not  –  impaired.

In a letter NARUC addressed last month to the FCC, 80 state regulators from 34 states called on the federal agency to not obstruct them from playing a continuing role in upholding and setting policies pertaining to local phone competition.

If the FCC took the most extreme position limiting the states’ involvement, “I would be very surprised if NARUC didn’t appeal,” Ramsey said.

But Ramsey said he does not believe that is what will happen.

“That is the least likely outcome,” he said. “I believe there will be a state role” and “it will not be a minor one.”

However, Atwood said the FCC is obligated to take the lead role.

It is SBC’s position that “the FCC really doesn’t have the discretion to say, `States you go and determine where there is impairment.’ . It’s our position that the (1996 Telecommunications) Act is clear that that’s a federal decision,” said Atwood, the former wireline bureau chief for the FCC.