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Wednesday, December 15, 2004

TRO: Temporary Restraint in Order
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At the risk of underscoring our fearless leader's purported disinterest in today's Triennial Review Order (TRO) from the FCC, I have to concede that the agency's most important task is to maximize its chances of being upheld on appeal, so that it can go back to focusing on more innovative services, such as Internet voice, wireless and broadband. The safest approach would have been for the agency to craft a concrete standard based on evidence of both actual and potential competition from multiple technologies, and from existing services such as "special access." Based on what we've heard, the Court will probably agree that the FCC has moved the ball forward, but the Devil's in the (forthcoming) details -- the full text of the order may not be out for days or weeks.

The FCC moved the ball forward in several ways. First, it signaled that competitors could no longer provide service, in essence, by leasing established phone companies' entire networks at steeply-discounted rates set by the government. Second, the agency stated it would consider the future prospects of competition in deciding whether companies entering the market are "impaired" and thereby entitled to lease those parts of the network the agency's rules still cover. Third, the agency established numeric thresholds so that incumbent phone companies will not be required to lease parts of their networks to competitors throughout geographic areas, rather than in specific locations.

Yet there are some potential risks in the agency's approach that cannot be fully evaluated until the order is released. Although the agency will be able to assure the Court that companies will need to invest in their own equipment to get the full economic benefit of owning a network, those assurances won't become effective until the end of long transitions lasting over a year or more. So the Court will need to decide whether those transitions are reasonable steps to prevent disruption of service to customers, or whether the agency has unduly prolonged obligations it had no authority to adopt in the first place. Similarly, although the FCC apparently has heeded the Court's warning not to disregard the prospects for future competition based on a variety of technologies and services, the Court may be skeptical that the agency afforded reasonable weight to such evidence. The numeric thresholds set by the agency, after all, do not appear to rely expressly on such evidence. And it's hard to shake the feeling that a Court that has criticized the FCC harshly for failing to comply with the law in this area three times previously may not be satisfied by a fourth attempt under which the FCC still would require incumbents to lease certain equipment in the vast majority of cases.

Only time (and the Court itself) will tell whether the pluses of today's decision outweigh its minuses. Thus, restraint is in order even with respect to my cautious optimism. Again, the consumer benefits of the competition covered in this decision already have been eclipsed by the benefits of wireless, Internet telephony and broadband. With any luck, the FCC may be able to put this proceeding to bed soon so it can devote more of its energies to finishing the framework to promote investment in these more innovative services.

posted by Kyle Dixon @ 2:55 PM | Communications , The FCC

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