Feb. 20, 2003 – Local telephone competition — to date no more than a possibility in the Virgin Islands — was not made any more unlikely by a 3-2 vote Thursday on a complex issue before the Federal Communications Commission in Washington, D.C.
FCC chair Michael Powell had wanted, in effect, to make it harder for competing systems to offer local phone service, but he was outvoted 3-2 by the full commission on the issue.
Powell and the so-called "Baby Bells" — regional phone companies created with the government-ordered breakup of the old AT&T monopoly in 1984 — had argued that the federal competition rules should be dropped altogether.
The majority trio on the commission decided that if there is to be any lessening of pressure on the existing phone companies to share their phone lines with would-be competitors, those decisions must come from the state and territorial public utility regulatory commissions.
The incumbent local carriers, however — notably the Baby Bells (which got their name from "Ma Bell," the nickname of The Bell Telephone System, a conglomerate of corporations headed by AT&T prior to the divestiture), but also other service providers such as Innovative Telephone locally — won a few concessions.
The principal issue before the FCC on Thursday was an attempt by Powell to roll back an FCC regulation adopted seven years ago, during the Clinton administration, requiring the Baby Bells to lease their existing lines to potential rival phone companies at discounted rates, avoiding the need for competitors to lay their own lines. In effect, the regulation allows new competitors to purchase services from the Baby Bells at wholesale rates to "resell" telecommunication services.
On the 3-2 vote, one of the Republican commission members voted with the two Democratic members to maintain the competition rule.
With huge sums of money at stake, technological issues galore, and federal and state/territorial agencies playing roles in the matter, the outcome cannot be described in black-and-white terms.
However, Wall Street regarded the decision as clearly bad news for the Baby Bells, with stock prices for SBC and Verizon, for example, falling between 6 and 10 percent Thursday after the decision was announced around lunch time. Innovative Telephone and its parent company, Innovative Communication Corp., are owned by Jeffrey Prosser, with no shares traded publicly, so there was no public measure of impact.
Another indication of the wide interest in the decision could be found on the Internet. The FCC, a technologically adept federal agency, broadcasts its public hearings on the Web. But on Thursday, the number of people wanting to use their computers to follow the hearings was so large that the FCC server was unable to handle everyone wanting to view the proceedings.
The internal politics of the situation revolved around two variables:
– First, the FCC, like some other federal commissions, must have at least some members from each major political party, so there are currently two Democrats and three Republicans.
– Second, one of the GOP members, Kevin Martin, allied himself with the two Democrats to block Powell’s de-regulatory moves. This led the FCC chair, for the first time in a dozen years, to issue a minority report.
In his dissenting opinion, Powell, the son of Secretary of State Colin Powell, termed Thursday's decision "a molten morass or regulatory activity" that would "prove too chaotic for an already fragile telecom sector."
In the Virgin Islands, the Public Services Commission rejected a bid two years ago by a company seeking access to Innovative Telephone lines to establish rival local telephone service. However, at its most recent meeting, the PSC agreed to revisit the possibility at the request of the company that has since acquired the one involved in the earlier bid.
In Thursday's action, in a mild concession to the Baby Bells and other existing phone systems, the FCC did vote to ease regulations on those carriers regarding the sharing of fiber-optic lines for broadband, the new telecommunications technology for moving electronic data around far more swiftly than was possible with copper wires.
The Baby Bells had complained in Washington-area television and print media advertising, among other places, that they would have no incentive to invest in fiber-optic technology if their competitors could share the benefits.
Debate has raged for years over the concept of fostering competition between outside companies with no physical systems of their own and the existing firms that have the local phone business and the physical infrastructure. On one side are consumer advocates and the potential rival phone companies; on the other are the incumbent carriers.
Thursday's FCC decisions amount to just one more skirmish in a huge, complex and ongoing conflict.
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