The Regulatory Status of Broadband Services: Information Services, Common Carriage, or Something in Between?
Subcommittee on Telecommunications and the Internet
July 21, 2003
3:00 PM
2123 Rayburn House Office Building

Mr. Thomas Jones
Willkie Farr & Gallagher

1875 K Street, N.W.
Washington, DC, 20006-1238

I want to begin by thanking Chairman Upton, Ranking Member Markey, and the Members of the subcommittee for the opportunity to testify today. My name is Thomas Jones. I am a partner in the law firm of Willkie Farr & Gallagher. I am testifying today on behalf of three competitive local exchange carriers or "CLECs": Allegiance Telecom, Conversent Communications, and Time Warner Telecom. I would ask that in addition to my testimony today, you include in the record a joint paper to be filed by these companies in the FCC's Title I proceeding.

Allegiance, Conversent and Time Warner Telecom are all facilities-based CLECs that serve business customers. Allegiance and Conversent deploy their own switches, but they rely on the right established in the Telecommunications Act of 1996 to use unbundled broadband loops from the ILECs to provide telephone and broadband data services to small and medium-sized business customers. Time Warner Telecom uses its own facilities to provide voice and broadband services to medium and large business customers, but must still purchase broadband loops from the ILECs to serve many of its business customers.

I would like to explain today why the FCC's proposal to reclassify the transmission used in ILEC broadband Internet access as an unregulated Title I service threatens Congress' established telecommunications policies in two fundamental ways. First, by reclassifying these services out of Title II and reversing decades of precedent, the FCC would eliminate the ILECs' obligation to sell broadband loops to their CLEC competitors. For most small and medium-sized business customers, the ILECs own the only broadband loops. No other service provider, including cable, wireless or satellite, has deployed ubiquitous business end user connections that have the upstream capacity, reliability and security features of ILEC loops. The ILECs' market power over business loops remains, regardless of what is sent over its loop facilities, whether it be broadband or narrowband, or if the loop is old, new, borrowed or blue. Therefore, the only way for CLECs to serve the business market is by purchasing ILEC broadband loops. Eliminating their right to do so under Title II, which mandates reasonable prices and service quality, will likely destroy competition in this dynamic and innovative segment of the economy.

The purported goal of the FCC's proposal is to treat ILEC broadband and cable modem services the same way. However, the end result of reclassifying ILEC broadband transmission as a Title I service would be to throw the baby out with the bath water. ILECs would no longer be required to share broadband loops in the residential/mass market in which cable competes, but ILECs would also no longer be required to provide broadband loops in the business broadband markets in which cable usually does not compete and in which the ILECs usually own the only broadband end user connections.

If the FCC wants to consider deregulating certain aspects of ILEC broadband transmission, it can only do so within the scope of its statutory authority established by Congress in the Communications Act. To the extent that there is any justification for deregulating the ILECs, and it is our testimony that ILECs' market power continues to warrant regulation, then the FCC must justify such deregulation under the standards set forth by Congress in Section 10 of the Act. That provision gives the FCC the authority to target forbearance to markets where the ILECs lack market power. From both a policy and legal perspective, Section 10 is the only legitimate vehicle for deregulating ILEC broadband.

Second, reclassifying the broadband transmission used to provide ILEC Internet access as a Title I service threatens many core social and national security policy objectives established by Congress. For example, the FCC's proposal could cause statutory requirements regarding universal service, privacy, access to the disabled, and unauthorized changes in service providers to become inapplicable to broadband. Moreover, the requirements of the Communications Assistance for Law Enforcement Act (CALEA) might not apply to transmissions delivered over broadband, including voice over IP.

While some observers believe the FCC can selectively reimpose these requirements under Title I, I respectfully submit that such an effort is beyond the FCC's jurisdiction. The Communications Act specifically states that the requirements of Title II only apply to the extent a telecommunications carrier is engaged in providing telecommunications services. Reclassification would mean that ILECs would not be providing broadband as telecommunications services, and Supreme Court precedent teaches that the FCC may not rely on its Title I authority to change that fact.

In sum, we urge Congress to remind the FCC that it lacks the authority to interpret Title II out of the Act whenever it pleases. Congress has specified the mechanism that the agency may use to deregulate as warranted without negative consequences for competition and other congressional goals -- that mechanism is Section 10, not reclassification.

Again, thank you for allowing me to participate here today, and I would be happy to answer any questions.