Negotiate, not litigate

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When the D.C. Circuit Appeals Court in March once again threw out the Federal Communications Commission's rules requiring incumbent telephone companies like Verizon to share their network facilities at regulated rates, the court handed the telecommunications industry a huge opportunity.

In short, there is an opportunity to replace the traditional public utility, litigation-oriented regulatory regime with a less-regulated, commercially oriented regime in which telecom providers wishing to share facilities are free to enter mutually acceptable agreements.

But this chance may be squandered by state regulators, and federal regulators too, if they insist on putting their own regulatory stamp on the freely negotiated agreements.

In the last century's telecom world, communications services were largely provided on a monopoly basis. In that old environment, a regime heavily weighted toward regulation and litigation may have been appropriate, or at least acceptable.

In today's Internet Age environment, however, wireline telephone companies, cable companies and wireless telephone companies, not to mention new Voice over Internet Protocol ("VoIP") and electronic messaging providers all compete.

Consumer welfare will be greatly enhanced if these service providers are allowed to do what they do in other competitive markets -- freely negotiate private contracts that best meet their mutual needs.

The appeals court held that the FCC's existing rules are inconsistent with the 1996 Telecom Act because they mandate that incumbent telecoms provide competitors with virtually unlimited access to the incumbents' networks even if the new entrants are not impaired from providing their own facilities.

This came after the FCC received two previous judicial rebukes of these rules for the same reason. The court's frustration, in chastising the "commission's failure, after eight years, to develop lawful unbundling rules, and its apparent unwillingness to adhere to prior judicial rulings," was understandable.

After the court's decision, one option open to those who favor continuing the old regime is to just keep litigating by asking the Supreme Court to review the appeals court decision.

With the opening provided by the decision, however, the previously bitterly divided commission came together March 31 to urge telecom providers to "begin a period of commercial negotiations designed to restore certainty and preserve competition in the telecommunications market."