Triennial Review Order

The FCC access standards were based on a “fundamental misreading” of the law.

From a plain reading of the 1996 act, there can be no doubt that Congress intended to restrict competitors’ reliance on subsidized access to the incumbents’ networks. Yet the FCC crafted eligibility standards that effectively granted access subsidies to any and all competitors for the asking.

This disregard for congressional intent was recognized by the U.S. Supreme Court, which in 1999 struck down the first set of FCC regulations (issued three years earlier), and ordered the agency to rewrite the access rules.

A second set of standards, issued in 1999, was likewise judged to be overly broad in 2002 by the U.S. Court of Appeals for the District of Columbia. The FCC was again ordered to redraft the regulations.

The FCC issued a third set of rules, titled the “Triennial Review Order,” on Aug. 21, 2003, on a vote of 3-to-2. Commission Chairman Michael Powell, who joined Commissioner Kathleen Abernathy in dissent, publicly excoriated the majority for “taking a politically expedient course instead of the right course.”

For the first time, the rules shifted to states the responsibility for determining what market conditions would warrant subsidized access, rather than setting a federal impairment standard as Congress intended. If allowed to stand, the order would have required 50 state utility commissions to issue 50 sets of standards for determining whether competitors were eligible for subsidized network access.

To its credit, the FCC declined to require incumbents to provide subsidized access to broadband facilities, recognizing that to do so would jeopardize investment in deployment. But this recognition, while welcome, only underscored the irrationality of continuing to require forced access to the local landline network.

Once again the rules were challenged. On March 2, 2004, the U.S. Circuit Court of Appeals in Washington, D.C., ruled that the FCC had overstepped its authority. The court rejected the commission’s delegation of regulatory authority to the states, ruling that “the Commission’s position is based on a fundamental misreading of the relevant case law.” Moreover, the court ruled that the commission “made no visible effort” to determine whether forced access is, in fact, justified nationwide. On this issue, the court characterized the FCC’s findings as “vague almost to the point of being empty.”

The D.C. Circuit panel gave the FCC 60 days to rewrite the regulations, after which the forced-access rules would be vacated. A petition to extend the deadline was filed by state regulators, including the Michigan Public Service Commission, along with competing local service providers. The petition was rejected on June 14, 2004 by U.S. Supreme Court Chief Justice William Rehnquist.

On June 16, 2004, the FCC rules became legally void, creating a major opportunity for reform.

FCC Chairman Michael Powell expressed optimism that new rules could be drafted “expeditiously.” But Michigan Rep. John Dingell, noting the FCC’s history of “bizarre interpretations” of the 1996 Telecommunications Act, urged the industry to proceed freely.

“The time for legalistic bickering and squabbling has passed,” Rep. Dingell said. “All companies in the telecommunications industry should now compete vigorously, offer the new services and products that consumers want, and build the broadband infrastructure that can reinvigorate job creation.”