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Wednesday, January 28, 2004

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Well, I just sat through the two and a half hour oral argument before the DC Circuit reviewing the FCC's August 2003 Triennial Review Order. With the usual disclaimer that what is said at oral arguments is sometimes not a good predictor of results, here are two quick impressions:

1. The three judge panel, especially Judges Edwards and Randolph, seemed very concerned that the FCC violated the 1996 Telecom Act by delegating too much decisionmaking authority to the states to determine whether "impairment" exists for network bundling purposes. I'm not certain the court will reverse on this point, but the chances look pretty good it will. Never one to say, "I told you so," I'll merely point you to my piece, "A Call for Real Federalism," published in Legal Times in March 2003. There, commenting on the FCC handing over to the state PUCs too much authority, I said: "In the end, such a misuse of federalism, properly understood, leads to unsound communications policy making. And the bet here is that it will lead to yet another defeat in the courts for the FCC's network sharing rules." (Apart from the legal issue, to understand why, as a policy matter, telecommunications networks are changing in a way that renders the traditional state regulatory role much more problematical, see Doug Sicker's "Delocalization" paper released yesterday by PFF.)

2. On the impairment issue itself, Judge Williams did most of the tough questioning, seemingly trying to figure out a way--consistent with the statute's ambiguity--to rule that the FCC is still tilting too far in the direction of too much mandatory unbundling. Judge Williams clearly believes--as do I--that excessive unbundling is a disincentive to new investment by both the ILECs and CLECs. What is less clear is whether there is an effective remedy that Judge Williams and his colleagues can envision themselves imposing under the statute as currently written that will require the FCC to materially further restrict unbundling. I don't think the court wants to get itself in the position that Judge Greene was in after the AT&T breakup of overseeing the intricacies of the telecom industry. And I doubt the Supreme Court will allow the DC Circuit to put itself in that position.

What a pity that Judge Williams was not one of the key drafters of the 1996 Telecom Act or the FCC Chairman leading the effort to draft the initial overly regulatory unbundling rules. Oh well, he probably would not have wanted to trade in his robes!

Anyway, and importantly, the court didn't give any overt indication that it is inclined to reverse the FCC's elimination of the unbundling mandate for new fiber and packet-switched facilities, that part of the TRO order that is more future-oriented than the circuit-switching part. Assuming the FCC makes some important clarifications on reconsideration that allow ILECs more broadly to roll out new fiber without the unbundling obligation hanging over their heads, it looks like the positive deregulatory step the FCC took regarding new facilities will probably stand up in court.

PS--I didn't stick around for the post-argument spin, but I suspect, as was the case in New Hampshire after the results were reported last night, the spin out of the war rooms of all of the contesting parties, whether CLECs, ILECs, the states, or the FCC, was: "We won because...[fill in the blank here yourself]."

posted by Randolph May @ 1:32 PM | General

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