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USTelecom Petition For Forbearance from Legacy Telecom Regulations

02.16.2012
Petition

USTelecom Petition For Forbearance from Legacy Telecom Regulations

EXECUTIVE SUMMARY

The communications industry is in the midst of a paradigm shift, marked by the transition from the Public Switched Telephone Network to Internet-Protocol based networks. As broadband networks and the variety of applications they support displace traditional circuit-switched services, the Commission’s rules must keep pace. Unfortunately, many of the Commission’s rules were adopted in a different era, long before the advent of broadband networks or the creation of the public Internet.

The Commission recognized the need to modernize its rules when it recently adopted comprehensive reform of the universal service and intercarrier compensation systems. The Commission’s reforms were premised upon the reality that these systems do not reflect today’s communications marketplace and are poorly equipped to address the challenges associated with broadband networks. This reality is not limited to universal service and intercarrier compensation, and many of the Commission’s legacy telecommunications regulations suffer from the same shortcomings.

Consistent with the Commission’s commitment to eliminate unnecessary regulatory requirements, the United States Telecom Association files this Petition seeking forbearance from certain outdated legacy telecommunications regulations. The regulations that are the subject of USTelecom’s Petition are vestiges of a bygone era – an era when telephone companies only offered circuit-switched services and consumers could only buy local voice service from their incumbent local exchange carrier. Some of the regulations from which USTelecom seeks forbearance are remnants of traditional rate-of-return regulation that continue to apply to companies operating under price cap regulation. Others reflect a regulatory artifact by which regulatory obligations are dependent upon whether a voice call travels across certain facilities.

What each of the rules identified in this Petition have in common, however, is that none has relevance in today’s broadband world. These rules no longer serve any regulatory purpose, and there no longer exists any current federal need for these rules. Furthermore, the rules at issue are unnecessary to the Commission in performing its regulatory functions. Indeed, the   Commission has granted forbearance to the largest incumbent carriers from compliance with certain rules that are the subject of USTelecom’s Petition and identified other rules from which forbearance is being requested as being ripe for elimination. In fact, USTelecom’s Petition includes a number of rules that were identified as no longer necessary in the Commission’s latest Biennial Review report released just two months ago. And with some of these rules, the Commission already (and long ago) concluded that they were unnecessary, yet these rules persist.

Forbearance is warranted because the rules have been rendered obsolete by technological and market changes. From a technological standpoint, the Commission’s legacy telecommunications regulations are ill-suited to facilitating, and in fact hamper, broadband deployment. Furthermore, these regulations apply solely to incumbent telecommunications carriers, even though incumbents now provide voice service to significantly less than half of American households. Indeed, the most recent survey by the Center for Disease Control (which has been relied upon previously by the Commission) has found that more than 32 percent of households have completely “cut the cord” and have abandoned their wireline phone altogether. And at least one prominent industry analyst has projected that by the end of 2012, there will be more wireless-only households than the total number of households taking service from all incumbent providers combined. At the same time, incumbent carriers compete against a host of providers, including cable companies that offer service to at least 93 percent of American -iiihouseholds, already serve approximately 20 percent of the residential voice market, and are the primary provider of residential broadband. Under these competitive circumstances, the current outdated regulatory regime imposes unnecessary costs on a limited subset of competitors to the detriment of these competitors and consumers alike.