Martin Offers Proposal for Resolution of Pending FCC Broadband Proceedings

December 12, 2002. Federal Communications Commission (FCC) Commissioner Kevin Martin gave a speech [13 pages in PDF] at a conference hosted by the Practicing Law Institute and the Federal Communications Bar Association (FCBA) titled "Telecommunications Policy and Regulation".

Martin began by again stating that the FCC should take action in four of its most important long pending Notice of Proposed Rulemakings (NPRMs) relating to broadband regulation. He said that "We have four critical rulemakings that have been pending since the beginning of the year: the Triennial Review of unbundled network elements, the dominant nondominant proceeding, the wireline broadband NPRM, and the cable modem service NPRM."

Martin stated that "The records are complete, we have considered and debated the issues at length, and the proceedings are now ripe for action." He added that "industry conditions cry out for answers". This is a point that Martin has made in other recent speeches.

Martin (at right) then listed three core values and goals that he said should guide the FCC's decision making. "First, the Commission should make its top priority new investment and deployment of advanced network infrastructure. ... Second, the Commission must minimize further questions and avoid creating greater uncertainty or prolonging ambiguity in this area. ... Third, the Commission must be responsive to the courts by outlining a clear standard on the necessary and impair test while remembering Congress’s goal of ensuring that the local markets are truly open to competition.

Martin made several recommendations regarding the goal promoting investment and promoting deployment of broadband facilities.

TELRIC Pricing. Martin said that "we need to adjust the TELRIC pricing formula for all new investment on a going forward basis. In my view, the TELRIC pricing formula provides incumbent service providers with an insufficient return on investment capital for new infrastructure." He added that "In a nutshell, the existing TELRIC formula fails to accurately measure the true risk of capital investment under current economic conditions, and creates an unnecessary barrier for the deployment of broadband facilities."

Fiber to the Home. With respect to the place of new fiber investment deployed to a customer premises in the FCC's unbundled network element regime, Martin said that "if incumbent service providers decide to build new fiber local loops to a customer premise, they should be free of ``old style´´ legacy rules."

Hybrid Facilities. Martin stated that "new entrants should only use incumbent facilities that are truly necessary for new entrants to provide service" and that the FCC "ought to reexamine how our unbundling and/or pricing rules apply to incumbent deployment of new facilities."

He elaborated that "I believe that the Commission should freeze the service capacity level that must be made available on new or upgraded facilities to the service capacity level provided by the ILEC prior to the new investment in a hybrid facility." Moreover, he said that "I believe that incumbents should be given the proper incentives to push fiber deeper into their networks and closer to the American consumer."

Martin then made several recommendations regarding the goal of minimizing uncertainty.

Need for Quick Action. He reiterated that "we should act quickly on our major pending rulemakings" including the UNE triennial review, the wireline broadband NRPM, and cable modem service NPRM. He said that "Protracted uncertainty can prolong financial difficulties. Regulatory uncertainty and delay can function as entry barriers in and of themselves, limiting investment and impeding deployment of new services."

Martin's Proposal for Resolving Pending Proceedings. He then reviewed the logical alternatives available to the FCC for resolving broadband regulatory classification and unbundling issues, and stated his preference.

One alternative -- Martin's choice -- is to "treat DSL services similar to cable modem service. In doing so, we would need to change our Computer II rules so that incumbent providers would no longer be required to provide underlying transmission services as retail service offerings. Providers nevertheless would have the incentive to provide broadband transport to unaffiliated ISPs on reasonable terms, because only by doing so could they maximize the value of their investments. Such offerings would be made available on a private carriage basis and not as unbundled tariffed offerings. The Commission could, on an interim basis, guarantee ISPs access to broadband transmission services in a nondiscriminatory manner. Specifically, ILECs would be required to offer unaffiliated ISPs the same transmission services that the ILEC offers to its own affiliates through private carriage agreements. This nondiscrimination requirement could be put in place for two or three years, but then sunset unless the FCC extends it to all broadband providers."

He added that the only other logical alternatives would be to "treat cable modem services similar to DSL services" or to "classify wireline broadband as a telecommunications service, with the accompanying nondiscrimination requirements, and to acknowledge that the Commission was wrong when it declared cable modem service to be an information service. Instead, the Commission could determine that cable modem service is a cable service subject to the panoply of Title VI regulations currently applicable to cable service providers, such as local franchise obligations and service regulations."