New FCC chair may be force in telecom reform

WASHINGTON – The new chairman of the U.S. Federal Communications Commission (FCC), whoever that may turn out to be, could have significant power to shape the future of telecommunications regulation as the U.S. Congress looks to tackle telecom reform this year.

Current Chairman Michael Powell announced on Jan. 21 that he plans to step down from his post in March. Powell, a member of the commission for seven years, lead the FCC for four years as it attempted to referee disputes between large incumbent telecom carriers and competing carriers that arose after Congress passed the Telecommunications Act of 1996.

The ’96 Act established a set of rules in which the incumbent owners of much of the nation’s telephone network infrastructure — four companies often called the regional Bells — were required to share parts of their networks with competing carriers.

Now, as Powell leaves the FCC, several members of Congress have begun pushing for changes in telecom regulations. The push for telecom reform may gain steam with the announcement Monday that SBC Communications  intends to acquire AT&T, with the United States Telecom Association (USTA), a trade group representing incumbent carriers, suggesting the deal between former rivals shows that the ’96 Act no longer addresses the competitive realities in the telecom industry.

One leading candidate for the chairmanship has parted ways with Powell in the past. Current commissioner Kevin J. Martin broke with the commission’s Republican majority during the so-call triennial review order in February 2003. Martin and the commission’s two Democrats voted to continue many of the rules requiring the incumbent carriers to share parts of their networks with competitors, against Powell’s wishes to limit the network-sharing rules and favor what Powell called “facilities-based competition.”

The incumbent Bells currently own large chunks of the telecom networks, and a facilities-based approach would force their competitors to build their own networks.

Some lawmakers advocate fairly minor changes to the ’96 Act that would protect voice over Internet Protocol (VOIP) and other Internet-based applications from most federal and state regulations, including requirements that incumbent carriers share their networks with competitors.

Other lawmakers have talked about a major overhaul of the ’96 law that would tackle a range of issues, including simplification of the complex formula for access fees exchanged between carriers and reform of the Universal Service Fund, supported by carriers to promote telecom services in rural and poor areas.

FCC observers disagree on just how much a new FCC chairman can influence the telecom debate in Congress.

The new chairman is in the position to be “incredibly influential” this year, because the FCC is the expert agency on telecom issues, and many in Congress are likely to turn to the new FCC chairman for advice, said Ron Sege, president and chief executive officer of Tropos Networks Inc., a supplier of systems used to create large Wi-Fi networks.

“I think the FCC chair is in a position to play a leadership role in helping Congress formulate the rules,” Sege said. “This is a critical time.”

For CompTel/Ascent, a trade group representing competitors to the incumbents such as preacquisition AT&T, a new chairman represents a potential for a change in policy, away from Powell’s decision to favor incumbent carriers.

The appointment of a new chairman comes at a critical time for the competing carriers, often called competitive local exchange carriers, or CLECs, said H. Russell Frisby Jr., chief executive officer of CompTel/Ascent. CLECs have seen recent FCC decisions move away from network-sharing requirements.

The FCC chairman will have several other priorities in addition to telecom reform, Frisby said. The commission’s top priority should be its continued role in setting the network-sharing rules, he said.

Still, Congress is likely to look to the new chairman for guidance as it tackles telecom reform, Frisby said, and CompTel/Ascent is “very concerned” over who will be the next chairman. “So far, it appears that all the candidates … would be strong choices,” he added. “We think all the candidates are balanced, fair people.”

Among the candidates mentioned for FCC chairman are Martin, a former White House economic advisor, plus Michael Gallagher, director of the National Telecommunications and Information Administration, an agency that drives telecom policy for the Bush administration, and Rebecca Klein, a former head of the Texas Public Utility Commission and a former advisor to President George Bush while he was governor of Texas.

Other observers aren’t confident that the new FCC chair will have great influence on telecom reform. Ed Merlis, vice president for regulatory and government affairs at USTA, said Congress may look to the new FCC chair for technical advice, but many lawmakers have their own ideas about the larger policy questions. Three bills introduced in 2004 would have exempted VOIP from most federal and state regulation without making major changes to the ’96 Act.

“The legislative branch seeks guidance (from the FCC), but it’s not necessarily locked in,” Merlis said. “It’s more to the extent of whether the Congress would allow the chairman to be influential.”

Martin’s triennial-review decision didn’t endure him to the incumbent carriers that make up USTA’s membership, although the commission has since pulled back from some of those network-sharing rules.

Some observers believe Martin has the inside track because Bush will appoint the new chairman, and Martin served on Bush’s 2000 campaign, in addition to his White House post.

Others see a potentially larger role for the new chairman than the USTA does. The FCC chairman can have a “bully pulpit” with Congress that other commissioners do not have, said Randolph May, a senior fellow and director of Communications Policy Studies at the Progress and Freedom Foundation, a conservative think tank.

Part of the chairman’s influence, however, may depend on how much political muscle the Bush White House puts behind telecom reform, May added.

“He or she will be even stronger if the administration also gets involved,” May said. “If would just be great if the administration would get involved more in communications policy.”