This week a coalition of telecommunications companies launched a campaign to fight what they say are the efforts of big carriers to use Federal Communications Commission "forbearance" petitions to eliminate competition in their markets. The petitions allow incumbent companies like Verizon and AT&T to obtain FCC waivers from rules requiring them to offer their "local loops" to smaller companies at competitive rates. Critics argue that this maneuver deprives communities and local businesses of access to affordable and innovative new broadband services.

"The Bells today are making forbearance petitions their tool of choice to eliminate regulations that foster competitive entry and a competitive marketplace ensuring choice for consumers," the coalition charges. "Yet, the Commission has never adopted rules to handle these critical petitions."

This morning LLFCC caught up with Tom Cohen, an attorney who represents competitive telecommunications outfits such as XO and Covad. Cohen brought us up to speed on the issue.

LLFCC: Tom, what's at stake for the consumer in this fight?

TOM COHEN: For the consumer in various markets the third player in the market is a competitive telecommunications entity that leases facilities from the incumbent telephone provider or the Bell Company.

LLFCC: Such as Verizon or AT&T or Qwest, I presume. Who are these competitive companies? What do they do for people?

COHEN: They are companies such as Cavalier telephone company, which operates here on the east coast in Virginia, and throughout the mid-Atlantic. Cavalier provides the triple-play of voice, data, and video services over its facilities. So after the telephone company and the cable company, it becomes your third choice in a lot of markets.

LLFCC: How come third choice companies like Cavalier are able to do that?

COHEN: It's very difficult to enter into the local telecommunications business. Building plants and networks is incredibly expensive, and you've got to put that in up front. You can't build that network for one person. So you got to build it hoping that a bunch of people will come and do it.

So what Congress did in the 1996 Telecommunications Act is say, in order to facilitate that competition, the incumbent telephone company, here Verizon, would have to lease its facilities, its loops and transport facilities to Cavalier so it could more quickly enter that market.

Then over time as Cavalier built up more and more market share, it would build its own facilities so eventually it did not have to use the Verizon facilities.

LLFCC: Why is that good for consumers?

COHEN: It gives them a choice of another provider. So you not only have a choice that helps with holding down pricing, but Cavalier and others create innovative services that the incumbent doesn't. It has to hustle more to get the consumers to sign up.

LLFCC: What kinds of innovative services are we talking about?

COHEN: The very first DSL services thrown out there were put out there by competitors, ahead of all of the big incumbent carriers. They're doing all sorts of IPTV services, different than what AT&T offers on U-Verse. They do all sorts of innovative ethernet and higher bandwidth offerings.

LLFCC: You are trying to stop forbearance petitions by Verizon, AT&T, and Qwest. What is a forbearance petition?

COHEN: As part of the 1996 Act, an enormous bill putting into effect new rules for telecommunications competition, the Congress wanted to have a provision that could sweep away the old rules more easily. So they instituted a process of regulatory forbearance where a regulatory party out there could petition the FCC and say: "Because there is lots of competition, you should no longer enforce the regulations against us."

Now this provision seems relatively innocuous, but the Congress put with it a shot clock of one year which can be extended by 90 days—three months. If the FCC did not act by that time, the forbearance petition was automatically granted. So it was a process more out of control of the regulators. It was certainly out of control of the Congress. And it gave more authority or more power to the parties seeking to get deregulated.

LLFCC: So if the FCC doesn't have its act together on a particular petition, all the big incumbent has to do is wait out the process and they get what they want?

COHEN: Right. But there's also another problem that people are now seeing. You go through a rulemaking proceeding, like the FCC did, to establish rules for the leasing of these facilities. It took the FCC also ten years to do that. And you gather all of this evidence about markets and about how people build facilities. And finally after court review you come up with new rules. The forbearance process allows somebody to file a petition to undo those rules immediately. Even before court review. Even before they take effect.

And they get a different legal standard to do it. So it undermines the entire regulatory process. Why participate?—almost.

LLFCC: Now Qwest got a forbearance petition granted in the Omaha, Nebraska area, right? What happened after that?

COHEN: Well, what's happened just recently is that McCleodUSA, a competitor in that market has filed with the FCC to reverse that decision, that the FCC's "predictive judgment" that Qwest would continue to lease facilities at competitive rates, and that other facility based competition has proven wrong.

LLFCC: What's their evidence for that?

COHEN: They have put in evidence showing, in effect, that competition has gone down. That all you have left is the duopoly [telephone/cable] in the residential market of Qwest and Cox, the cable company. And in the business market you've gotten more and more of the competitors, who are really the only players in the market, to withdraw from the market.

The alternative, under the 1996 Telecommunications Acts, is you buy access at what are called "special access" rates and terms. Those are much more expensive. So here you are, a competitor, and your business is already hard enough, and now you've got to pay more to lease facilities. So what do you do? Well what Mcleod is doing is exiting the market. The other alternative is you say, "You know what? I'm not going to sell to smaller businesses or people with less demand. I'll only serve the top of the market."

So you pull out of the market. What happened in Omaha is that the FCC made a whole lot of "predictive judgments" about "oh, don't worry about competition." Well, they've proven to be wrong.

LLFCC: You want the FCC to establish new rules for these forbearance petitions.

COHEN: Right. This process is out of control in many different ways. First of all, the statute has problems with this "shot clock" and then being deemed granted. Or with the fact that it undermines other parts of the act. And it truly does. If I'm Congress I should be upset. It usurps my authority. Here I go out there and I write all these pro-competitive laws, and now the FCC, using forbearance authority, can just repeal all of them, in effect.

What we say is that Congress should either repeal or amend the statute. But we know that that's going to be a long term proposition. So we say in the meantime, FCC, you need to get control of this process. You need to stop this late filed information that comes in at the 11th hour and 59th minute from affecting the process. You need to stop the misuse of confidential information and insure that states have a role, because they understand local, competitive environments just about better than anybody.

We're saying to the FCC: get control of the process.