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Appeals Court Lets Stand FCC Relief for Verizon
By Corey Boles
The Wall Street Journal
Saturday, December 7, 2007

WASHINGTON -- An federal appeals court rebuffed an attempt by Sprint Nextel Corp. and Qwest Communications International Inc. to overturn relief Verizon Communications Inc. won last year from rules governing aspects of its commercial broadband service.

The U.S. Court of Appeals for the District of Columbia on Friday declined to review the situation, saying that there was no Federal Communications Commission action to review.

The relief to Verizon was granted last year when four FCC Commissioners were deadlocked over the company's request and a deadline expired.  The fifth commissioner, Republican Robert McDowell recused himself because he had recently arrived at the agency and had a conflict from his previous role as a lobbyist for smaller telephone companies.

As a result of the deadlock, Verizon's forbearance petition, was "deemed granted."  Verizon was given considerable flexibility over the rates it is allowed to charge large companies subscribing to broadband service.  Sprint Nextel and Qwest were hoping the court would overrule the decision and roll back the relief granted to Verizon.  But the court disagreed.

"There is no indication that the commission or individual commissioners have abused this provision or have acted in bad faith," the Appeals Court ruled.

But Verizon's victory may be short-lived.  FCC Chairman Kevin Martin has circulated a proposed rule to the other commissioners that would partially remove the pricing flexibility Verizon has and would bring the company's regulatory treatment into line with rivals AT&T Inc. and Embarq Corp.

Those companies, plus Qwest, filed what are called "me, too" petitions seeking parity with Verizon.

In September, Qwest withdrew its petition when it seemed certain to be denied by the FCC.  The agency then partially granted the requests by AT&T and Embarq.  After the AT&T and Embarq decisions, Qwest then filed a second application seeking the same decision.

"We hope the FCC now feels comfortable with moving forward on Qwest's petition and grants it the same relief afforded our largest competitors, AT&T and Verizon," said Shirley Bloomfield, senior vice president of Qwest's federal relations team.

Mr. Martin's proposed order would bring Verizon into line with AT&T and Embarq as far as rules the companies must abide by.

A spokesman for Verizon said the rules should not be changed.

"This occurred 20 months ago.  Since then we have negotiated more than 200 contracts with large companies and prices have not gone up," said David Fish, the spokesman.

The Verizon case has been highlighted by lawmakers and other critics of forbearance petitions as an example of why the current FCC framework needs repair.  Mr. Martin was pressed by members of the House Telecommunications Subcommittee to commit to always holding a vote on future forbearance petitions at an oversight hearing earlier in the year.

Two senior Democrats, Reps. John Dingell, D-Mich., and Edward Markey, D-Mass., the chairmen of the House Energy & Commerce Committee and the telecommunications subcommittee respectively, introduced legislation in October that would remove the "deemed granted" language in the Communications Act of 1934 where it is found.

The FCC declined to comment for this article.

"While we are disappointed in the court's decision, we are encouraged that leaders in Congress have recognized that the FCC's forbearance process is broken and that the law needs to be changed," said John Taylor, a Sprint Nextel spokesman.  "This decision demonstrates that changes in the law cannot happen soon enough."

Write to Corey Boles at corey.boles@dowjones.com

http://online.wsj.com/article/SB119705599992217408.html?mod=us_business_whats_news