- The Washington Times - Tuesday, February 25, 2003

Politics triumphed over good policy at the Federal Communications Commission (FCC) Thursday, when a majority of commissioners broke ranks with Chairman Michael Powell while voting on new regulations for local telephone companies. Mr. Powell had wanted the FCC to change the rules, but he was outmaneuvered by Commissioner Kevin Martin, a fellow Republican whose own plan got the support of two Democratic commissioners. The result of this jockeying of egos and agendas will be paralysis, because the plan that Mr. Martin & Co. approved will generate a flurry of court challenges around the country and stymie regulatory reform.

On the brighter side, the FCC did speak with one voice on broadband, or high-speed Internet. Mr. Powell, Mr. Martin and other commissioners supported dropping a requirement on the Baby Bells to lease out their fiber-optic cables for broadband to competitors.

But they significantly disagreed on rules for the local telephone market. Under Mr. Powell's plan, the FCC would have dropped a requirement on the Baby Bells to lease out, at government set and below market prices, part of their technological infrastructure to rivals. Mr. Powell urged commissioners to set a federal rule freeing the Baby Bells from having to lease out their switches, known as the brains of the telecommunications network.

Mr. Martin, on the other hand, proposed letting states decide what rules for the local phone companies should be. Mr. Martin's plan prevailed. And since the FCC, at Mr. Martin's bidding, failed to relax federal regulations, rules on telecommunication regulations will be fought out in state courts around the country. Many of these cases will then be heard by the 12 federal court of appeals and, finally, at the Supreme Court. The result will be a regulatory paralysis for several years.

And that apparently, is what the White House wanted. Relaxing leasing requirements on the Baby Bells would reinvigorate the industry as a whole and give companies new incentives to develop new technologies and modernize existing ones. But the White House, we have heard, feared that deregulation would cause a short-term rise in local telephone rates right in time for the 2004 elections. So Mr. Martin, who campaigned for President Bush and whose wife is Vice President Dick Cheney's chief public affairs strategist, convinced the FCC to do what was best for the White House, rather than the industry. But eventually, the Baby Bells will prevail, because the courts, first the Supreme Court in 1999 and then the D.C. Court of Appeals in May, have generally ruled in favor of deregulation, pursuant to the 1996 telecommunications act.

In terms of broadband, the FCC appears to have done the right thing, by deciding that the Baby Bells would no longer be required to lease out modern fiber-optic technology for broadband service. This move by the FCC was overdue. Cable companies control about 60 percent of the broadband market, and they have misused their dominance by becoming the gatekeepers to the virtual world, limiting surfers access to certain Web sites.

But the FCC's failure to deregulate the local telephone industry at the federal level reflects a weakness in the White House's policy shop. Apparently, they lack advisers expert enough to convey the policy short falls of a politically expedient argument.


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