FCC Takes Aim at Regional Bells

The head of the Federal Communications Commission has asked Congress for more authority to investigate and punish regional Bell companies that stymie federal efforts to promote phone competition.

In his first major legislative initiative since becoming FCC chairman in January, Michael K. Powell sent a letter Friday to the Senate and House commerce and appropriations committees seeking to boost the FCC’s current maximum $1.2-million fine to $10 million per incident.

Powell also asked lawmakers to lengthen the current one-year statute of limitations for charges that Baby Bells violated federal rules aimed at opening their lucrative networks to rivals seeking to provide high-speed Internet access and other telecommunications services.

“A vibrant, competitive local exchange carrier industry is central to Congress’ vision for opening local markets to competition,” Powell wrote.

The FCC is “working hard with our existing resources to enforce the local competition provisions” of the 1996 Telecommunications Act, Powell noted. But he added that current fines are “insufficient to punish and to deter violations in many instances,” given the “vast resources” of the four regional Bell companies.

Powell’s bid for expanded enforcement powers is bad news for the Baby Bell phone companies on two levels.

On one, it would be more costly for the Bells to defy the FCC and keep their local phone markets closed. And more fundamentally, it could mean that the new FCC chairman will not turn out to be the reliable champion of phone deregulation that the Bells had expected.

Powell has expressed increasing frustration that FCC fines do not influence the behavior of the Bells, whose yearly profits reach into the billions of dollars. But it remains unknown whether Powell would use the threat of higher fines to crack down on the regional Bell companies in response to rivals’ complaints.

The enigmatic Republican--who has said he does not favor more federal intervention but also has declared he will “challenge orthodoxy” and be “absolutely faithful” to existing law--declined to be interviewed Monday.

But his letter to Congress comes just days after the FCC told a federal judge the agency is investigating the nation’s second-largest local phone company--SBC Communications Inc.--for allegedly submitting false affidavits to try to win government approval to offer long-distance service in Kansas and Oklahoma.

The FCC has secured $27.6 million in payments from SBC in the last five months for failing to meet certain benchmarks aimed at promoting competition and ensuring quality phone service. SBC chose to pay those fines rather than quickly reform its practices.

Still, Powell’s letter drew skepticism from leaders of some consumer groups as well as companies seeking to compete against the regional Bells.

“I’m heartened by Powell’s recognition that the health of the [competitive phone] industry is important,” said Jason Oxman, a senior counsel for Covad Communications, a high-speed Internet access provider. “But we saw him in February and gave him a list of enforcement actions we thought needed to be taken.” As of Monday, Oxman said, “he hasn’t acted on any of them.”

“The core problem remains that consumers don’t have choice for local phone service,” added Gene Kimmelman, co-director of the Washington office of Consumers Union. “Increasing fines may be useful, [but] would these fines just be . . . passed along to consumers?”

Kimmelman added that “the fact that the FCC is admitting that there is a problem here makes it hard to see why Congress would be trying to reward these companies by giving them an opportunity to expand into new markets.”

This was a reference to legislation that would rein in the FCC’s regulatory power and give the Bells more freedom to enter the booming market for high-speed Internet access. The bill, which would allow the Bells to carry computer data and Internet services across long-distance phone lines without first having to open their local monopolies to competition, is sponsored by House Energy and Commerce Committee Chairman W.J. “Billy” Tauzin (R-La.).

Tauzin has been one of Powell’s chief political allies. Powell’s bid to crack down on the Bells won’t break that alliance, said Tauzin spokesman Ken Johnson.

Johnson said Tauzin is “totally on board with Powell and is not in conflict with his enforcement initiatives.”

“Congress has no choice but to crack the whip,” Johnson said. “Relying on the good-faith effort of the phone companies to comply with the law simply is not good enough anymore.”