FCC Deregulates Verizon's Big-Business Market
Action Lifts Price Controls, But Absence of Guidance Sows
Confusion in Industry
By Amy Schatz
Tuesday, March 21, 2006
Verizon Communications Inc. got a boost in the big-business
market as federal regulators agreed to deregulate its
high-volume data lines for its largest corporate customers.
The decision by the Federal Communications Commission
essentially lifts price controls and possibly reverses some
conditions imposed on the New York telecommunications company
last year during its acquisition of MCI Inc. It also gives
Verizon pricing flexibility for lucrative high-volume services
sold to major corporations, although regulations may continue to
stay in effect for smaller business customers.
The action signaled the FCC's willingness to expand phone
companies' control over high-speed Internet lines to cover the
large corporate market as well as residential customers.
But by granting Verizon's request without guidance, the FCC
prompted confusion in the industry Monday. The action could
lead to legal challenges by smaller competitors, particularly
companies that resell high-volume services, such as Internet
access, to small businesses. Also, other phone companies are
likely to file requests for similar relief with the FCC.
"It's the most lucrative market today, and this ensures Verizon
remains dominant in its territory," said Jessica Zufolo, a
telecom analyst for Medley Global Advisors.
Verizon Monday said in a statement it appreciated the FCC's
actions. In December 2004, the company asked the FCC to ease
rules on data pipes used by its enterprise customers, freeing it
from common-carrier obligations, notably rules guaranteeing
access at "just and reasonable" rates. The FCC lifted similar
rules last year on residential high-speed Internet lines. The
change frees Verizon from a variety of rules, including
requirements to interconnect with other providers or contribute
to the Universal Service Fund, which subsidizes phone services
for low-income residents and rural communities.
FCC Chairman Kevin Martin has supported giving the Bells more
control over data lines, saying it will encourage investment and
the spread of high-speed Internet access. He asked the
commission's other members to approve Verizon's request last
month, but the effort failed after the FCC's two Democrats voted
against the measure, saying it would restrict competition in the
"Like everyone else, it puts us at the mercy of Verizon. If we
pay them enough money, I guess we'll get service," said Earl
Comstock, chief executive of Comptel, an association of smaller
phone companies that compete with the Bells.
The Verizon proposal went into effect Sunday night because an
FCC rule grants petitions automatically if the commission
doesn't respond. Commissioner Michael Copps, one of the panel's
two Democrats, said the decision "erases decades of
communications policy in a single stroke. In effect, we provide
industry the pen and give it the go-ahead to rewrite the law."
The decision to grant Verizon's request without FCC guidance
could prove problematic since the original request was somewhat
broad. It is also unclear if the decision only applies to
Verizon or all carriers who provide such services.
AT&T Inc. said in a statement it was evaluating the
decision, but believes it "should apply to all market players."
And it is unclear which obligations Verizon still has on its
high-volume lines. For example, rules requiring telecom
companies to cooperate with law enforcement on wiretapping and
other electronic surveillance may no longer apply. Mr. Martin
is already planning to circulate an order to reimpose Universal
Service Fund obligations, FCC officials said Monday. The action
may also effectively undo some conditions imposed on Verizon
last year in its acquisition of MCI, such as requiring it to
lease access to high-volume lines to competitors along with a
limited price freeze on rates.
Write to Amy Schatz at