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FCC not yet off the political hook

With a stack of decisions that could reshape the telecommunications industry still on its plate, the FCC heads toward one of its stormiest political years in recent memory.

With a stack of decisions that could reshape the telecommunications industry still on its plate, the Federal Communications Commission heads toward one of its stormiest political years in recent memory.

The FCC has come under fire in recent months as critics and companies charge the commission has held up the progress of competition among telephone companies. Its most vehement naysayers have said the commission is responsible for the "failure" of the landmark telecommunications deregulation law passed in 1996 by Congress, and have accused the commission of bullying the companies it regulates.

"We handed implementation [of the law] over to the FCC," said Michigan Representative John Dingell, one of the Democrats' senior figures on telecommunications policy, at a recent Washington conference. "Clearly there is a high probability we made a terrible mistake."

Dingell is one of a group of policymakers from both parties who say they will pursue legislation next year scaling back the powers of the FCC. The Democrat has said he is even considering transferring some of the commission's regulatory functions to the Commerce Department.

Few Washington observers believe that the outcome of next year's debates will be that radical. But a group of other lawmakers, led by Senator John McCain, R-Arizona, have said they will use next year's reauthorization of the FCC's budget to reorganize or modify some of the regulatory body's functions.

Between Congress and a hard place
The critical scrutiny from influential political figures puts the commission--particularly moderate chairman William Kennard, who has served for just one year--in a difficult position, as it gears up to handle some of the most critical issues facing the telecommunications industry.

Early in the new year, the commission is slated to decide whether Baby Bell companies should be allowed to offer high-speed Internet access services, such as digital subscriber lines (DSL), without setting up separate subsidiaries or being forced to provide the service at a discount to competitors. Insiders at the Baby Bells say this is one of the most critical rulings they face, as the companies attempt to move away from their traditional voice-only businesses.

In the same vein, the commission will continue to ponder the controversial issue of how to regulate calls to Internet service providers. Under so-called reciprocal compensation contracts, the dominant local telephone companies have wound up paying rivals--who have focused on signing up ISPs as customers--millions of dollars in order to complete their own customers' calls to the ISPs. This decision was expected last November, yet has been continually postponed as commissioners struggle to balance the interest of state regulators and the big telephone companies.

Also on its plate, the commission is scrutinizing the three megamergers between AT&T and Tele-Communications Incorporated, SBC Communications and Ameritech, and Bell Atlantic and GTE. While outside political forces all have expressed strong opinions on these deals, debate has also highlighted internal differences on the question of whether the FCC has the right to place conditions on the merger deals.

Two of the five commissioners have expressed reservations about the commission's legal ability to do anything but approve or reject the mergers on narrow grounds, which may limit Kennard's flexibility in brokering any compromise decisions on the merger deals.

Still impatiently waiting in the background is the Baby Bells, who continue to push their applications for entry into long distance markets--an issue that has sparked some of the most bitter rhetoric on all sides thus far.

The Commission has rejected five Bell applications to enter long distance so far, saying that under provisions of the 1996 Telecommunications Act, the carriers have not yet satisfied the condition of opening their local markets to competition.

The making of the rules leading up to these decisions has been among the issues that have most angered political and business critics.

"If we're in the spring and we haven't had approval of a long distance certification request, if these companies are still being held out of the data market, if we don't have a solution to reciprocal compensation issued, I think we'll have some [legislative] activity," said Roy Neel, president of the United States Telephone Association at a recent press conference in Washington. The USTA primarily represents the large local telephone providers.

Neel, who once served as an assistant chief of staff to President Clinton, also raised some eyebrows in Washington by hinting the administration may weigh in on the side of the FCC critics. "I think there will be a real effort to pass legislation, and I think [it will be] bipartisan by the way, and there's even a possibility that we'll have administration support for it."

To date, representatives of the administration, such as Commerce Department assistant secretary Larry Irving, have been generally supportive of the FCC's efforts, blaming the slow pace of competition largely in part to delaying tactics and court challenges from the Baby Bell companies.

But the FCC will not be without defenders in its political battle. Long distance companies such as AT&T and MCI WorldCom have routinely supported the commission's decisions to block the Baby Bells' move beyond their own local spheres, and will likely continue to do so as the debate moves into Congress next year.

"We are looking for the commission to stay the course," said Peter Lucht, an MCI WorldCom spokesman. The commission and other federal agencies have weathered a series of Congressional attacks in recent years without much discernable damage to their operation, he noted.