FCC Deregulation Plans Assailed
Senators Question Agenda of FCC's Chairman

CHRISTOPHER STERN / Washington Post 15jan03

Federal Communications Commission Chairman Michael K. Powell's deregulatory agenda received a cool reception from a Senate committee yesterday, as several members questioned his plans to rewrite telephone regulations and media ownership rules.

Several senators on the Commerce, Science and Transportation Committee expressed concern that the FCC was preparing to relax the rules in ways that would reduce competition, raise rates and allow giant media companies to get even bigger. Committee Chairman Ernest F. Hollings (D-S.C.) had organized the hearing to discuss the state of competition in the telecommunications and media industries before he turns the reins of the committee over to his Republican counterpart, Sen. John McCain of Arizona.

"We are heading in exactly the wrong direction," said Sen. Byron L. Dorgan (D-N.D.). "You should have your foot on the brake, not your hand on the throttle."

Powell ran into particularly stiff opposition to an FCC staff proposal that would ease requirements that local phone companies lease parts of their networks to their rivals.

Opponents of the plan, who include Hollings, say the proposal would jeopardize competition in the local phone business just as it begins to take off.

AT&T Corp. and WorldCom Inc.'s MCI Group subsidiary have taken advantage of the rules during the past year to offer competition in 46 states and the District of Columbia. More than 10 million residential customers have signed up so far for local phone service provided by rivals of the regional Bell firms.

But local phone companies, including Verizon Communications Inc. and BellSouth Corp., object to the rules. The local firms argue that they are being forced to rent their networks to rivals at below-market rates. The U.S Court of Appeals for the District of Columbia last year ordered the FCC to revisit the issue, saying the agency had failed to provide a detailed justification for the rules on a market by market basis. The FCC faces a Feb. 20 deadline for issuing revised rules, often referred to as Unbundled Network Element Platform, or UNE-P.

Powell said the existing rules are not the only way to foster local telephone competition. "I do not accept that the only likely opportunity for competition is UNE-P and nothing else," Powell said.

In addition to easing the current regulations, industry sources say, the FCC is considering a proposal to reduce the role of state regulators in setting the rates that competitors must pay for leasing elements of the network.

But three of the FCC's five commissioners said yesterday that they supported a strong role for states and would not vote for a proposal that greatly reduced the influence of local regulators.

Among the three was Kevin J. Martin, one of Powell's fellow Republicans at the FCC. Martin suggested that state regulators could help the commission better justify its rules, making them more defensible in court.

Committee members, meanwhile, made it clear they were also concerned about proposals to loosen a variety of media ownership rules, including regulations that bar a single company from owning several types of media outlets in a market. For instance, the FCC has sought comment on a proposal to do away with a ban on one company owning a newspaper and a TV station in the same market or a TV station and a cable system in the same market.

"There is a real possibility that the FCC is going to shift policies so that one company can own the whole game in town," said Sen. Ron Wyden (D-Ore.). He said the current media landscape is already dominated by just five companies, News Corp., Walt Disney Co., AOL Time Warner Inc., Viacom Inc. and Clear Channel Communications Inc.

Powell declined to discuss the specifics of the FCC proposal, but played down what he called the "more melodramatic" descriptions of his efforts to deregulate media ownership rules. He noted that the FCC has lost four recent court cases in which it sought to defend its existing media ownership rules. He also argued that any significant media merger must win approval from antitrust regulators at the Justice Department or the Federal Trade Commission, making any FCC rules in the area redundant.