FCC Phone Rule Proposals Criticized

Conservative leaders, joining Democrats and a host of disparate groups, will urge the Federal Communications Commission today to pull back on proposals that would dramatically change telephone competition rules.

They are expected to say in letters filed with the agency that ideas the five commissioners are considering to reform the telecom industry would lead to higher rates and effectively prevent states from setting local rules for phone and high-speed fiber-optic service.

In one letter, conservative legal scholar Bruce Fein, a former FCC general counsel, contends that the proposed restructuring under review by the commission could run afoul of the Constitution by setting up a regulatory framework that Congress already has rejected.

“For an unelected commission to trump the policy wisdom of elected and accountable representatives of the people in the Congress wrenches separation of powers principles and epitomizes agency arrogance,” Fein wrote in his letter, a copy of which was obtained Sunday by The Times.

Fein adds his voice to a growing chorus of individuals and groups across the political spectrum opposing significant changes to the rules governing competition in the telecommunications industry.

What’s more, never have so many varying groups allied themselves against an agency’s efforts, even as the agency tries to forge a compromise, said commentator James Glassman, a fellow at the conservative American Enterprise Institute in Washington.

Last month, 15 Democrats and five Republicans signed a letter that criticized FCC Chairman Michael K. Powell’s position that the industry has enough competition to justify an end to regulated rates and much of the authority of state public utility commissions.

The FCC members, in their first review of competition rules under the Telecommunications Act of 1996, have been struggling to come up with a framework that passes court muster.

Major aspects of their previous efforts have been overturned in court, and the commission faces a largely self-imposed Feb. 20 deadline to come up with a solution.

With a deadline for public comments set for Thursday, others are quickly adding their opinions to the debate.

The American Conservative Union, for example, also is expected to file a letter today urging Powell to let the states continue regulating rates under a controversial rule that permits competitors to lease lines and equipment from the nation’s four Baby Bell companies at deeply discounted prices.

“The states are best suited to implement the competitive promise and congressional intent of the Telecommunications Act,” the letter states.

Like most conservatives, the group sees the issue as an unnecessary infringement on states’ rights, as well as a hammer on local competition, which is only starting to take hold.

The Information Technology Assn. of America, representing 450 high-tech companies, also will file a letter today arguing that the discounted prices are essential to maintain “if we are going to see growth, innovation and investment in this sector.”

In addition, the National Assn. of Regulatory Utility Commissioners, representing state regulators, is expected to add comments later this week. “The entire telecom world is buzzing daily, almost hourly,” association President David A. Svanda said.

The group has argued that state regulators know better than federal agents the status of competition in their states and are better able to set rates that comply with court rulings.

SBC Communications Inc., California’s dominant local phone service provider, and the other Bell companies, along with their larger suppliers, have been lobbying the FCC to remove rules requiring them to lease their equipment at what they contend is below cost.

About 10 days ago, Powell circulated a proposed order among commissioners that strongly endorsed the Bells’ position, but he has failed to gain enough support among his colleagues and is trying to find some middle ground.

He and other commissioners agree that competition is best fostered by companies that use their own facilities to provide service. Leasing access at cheap prices, they say, will discourage competitors from building their own facilities and the Bells from investing in new equipment.

But where that line should be drawn, and when, has been a thorny issue. Industry sources close to the arguments said the middle ground is fluid but seems to be more in line with Commissioner Kevin J. Martin’s view that states should continue with their rate-setting and other roles.

Consumers, state regulators, Internet service providers, Bell competitors and other busi- nesses are worried that the commission may adopt a plan that splits the rate-setting authority along one of two lines, either of which could stifle competition.

In one scenario, states would have authority over existing copper and high-speed lines, requiring the Bell companies to lease those to competitors at low rates. But the Bells would be able to keep their new high-speed fiber-optic lines off the regulated list and to themselves.

In another scenario, the dividing line would be set according to how many access lines competitors have at any one central switching station. Above a certain level, competitors would have to have lines physi- cally transferred to their own switches. Critics argue that such transfers would damage the quality of the line.

Those ideas were encompassed in a bill proposed by Reps. W.J. “Billy” Tauzin (R-La.) and John D. Dingell (D-Mich.) several years ago. Though the measure passed the House last February, it died in the Senate.

Fein argues in his letter to the FCC that Congress didn’t intend its policy debates over legislation to be a “mere dress rehearsal for a final performance before the commission it created.”

He and other conservatives also worry that the ideas the FCC is considering run counter to President Bush’s campaign promises and, more important, could hurt him in the next election if consumers are hit with much higher telephone rates.

“If Powell is successful, there’s no doubt that one effect will be rising telecom prices for consumers, and that would hurt the administration,” Glassman said.

Glassman and others say the White House has remained quiet on the issue and has not sought to influence the process.