January 28, 1999

**DISSENTING STATEMENT OF COMMISSIONER MICHAEL K. POWELL**

***Re:*** Policy and Rules Concerning the Interstate Interexchange
Marketplace; Implementation of Section 254(g) of the Communications Act
of 1934, as Amended; Petitions for Forbearance (CC Docket No. 96-61),
*Memorandum Opinion and Order*

# I. Introduction

I cannot support this decision to deny the reconsideration and
forbearance petitions filed by these five Commercial Mobile Radio
Service (CMRS) providers and their industry trade associations. Although
I am pleased to see that some regulatory restraint is shown by
continuing the earlier stay, limiting enforcement of 254(g)'s rate
integration provision to inter-MTA separately-billed CMRS toll calls,
and announcing the intent to issue a Further Notice, I disagree with the
analysis \-- or lack thereof \-- in this Order. Accordingly, and for the
reasons discussed below, I respectfully dissent.

# II. Statutory Interpretation -- Petitions for Reconsideration

The goals of Section 254(g) of the Communications Act are laudable and
uncontroverted as they relate to traditional, national, interstate
interexchange carriers that were clearly subject to the Commission\'s
policy prior to being incorporated into the 1996 Telecom Act. However,
even when looking at the plain language of the statute, I believe that
there are substantial questions as to whether Congress actually intended
to expand the Commission's pre-1996 rate integration policy to CMRS
providers and whether it should be expanded.

I am unpersuaded by the "plain language" analysis in the Order, for I
have trouble accepting that the phrase, "provider of interstate
interexchange services" in 254(g) is so clear and unambiguous. Congress
does not provide a statutory definition of the term "provider of
interstate interexchange services" and there certainly is not a common,
dictionary definition of the phrase or its terms to assist us in the
context of local, mobile wireless telecommunications providers. Indeed,
the Majority's conclusion that rate integration applies only to
"inter-MTA" service concedes that "interexchange" does not simply mean
"between exchanges" as standard interpretation would imply, for MTAs can
include multiple exchanges.[^1] Moreover, as far as I can discern, terms
such as "interstate" "interexchange" and "interLATA" are frequently
interchanged in different contexts, without the word choice affecting
the regulatory effect.

Interestingly (and inconsistently), the Commission has previously found
this very same language ambiguous \-- albeit in a slightly different
context concerning the scope of the requirement to integrate the rates
of affiliated companies:

The meaning of the phrase "a provider of interstate interexchange
telecommunications services" in Section 254(g) is, in our view,
ambiguous. That phrase is not specifically defined, nor does the statute
give any explicit guidance on how to treat affiliated companies. Thus,
we interpret this phrase in the way that best comports with our prior
rate integration policy, and Congress\' stated intent to codify that
policy.[^2]

Now, my colleagues apparently have looked at the phrase with new
spectacles and concluded that the phrase is *un*ambiguous and plainly
applies to CMRS providers. Statutory interpretation under the well worn
principles of *Chevron* require us to first determine if the language is
unambiguous.[^3] If so, that is the end of the matter. If it is unclear,
we are instructed to discern its intended meaning by turning to
legislative history. What we cannot do, is read the same language
plainly to achieve one purpose, but treat it as murky in order to import
legislative history to serve another purpose.[^4]

What is particularly troubling here is that, if we find ambiguity in the
language (as the Commission has at times), then the legislative history
leads us squarely to the conclusion that Congress intended to codify the
Commission's existing rate integration policy. That policy did not cover
CMRS carriers. Even when the Majority assumes, *arguendo*, that there is
some ambiguity in the statutory language, requiring an examination of
the legislative history, they look for something that "unambiguously
indicates" that CMRS providers are exempted from Section 254(g). But,
when it is undisputed that CMRS providers were not subject to the
Commission's pre-1996 Act rate integration policy, and where Congress
seems to say it is merely incorporating that policy, why would we expect
to find an explicit and unambiguous indication to exclude them?

My concern about how to read the statute and the legislative history to
discern the will of Congress in 1996 does not, of course, mean that the
Commission is now or forever precluded from examining whether the policy
should be expanded to cover CMRS. But, we should do so in a consistent,
fair and reasonable manner. In light of the provisions ambiguity and the
Commission's prior interpretations, I do not think that CMRS carriers
have had fair notice and the ability to adequately address whether this
policy should be similarly expanded to cover CMRS carriers.[^5]

I, thus, would have preferred to grant reconsideration on the grounds of
inadequate notice and initiated the appropriate proceeding to consider
the applicability of Section 254(g) to CMRS providers and, if
applicable, whether or not to forbear from its enforcement.
Unfortunately, the Majority accepts the applicability of 254(g) as
obvious and lurches to the question of whether to forbear. It is the
summary consideration of this question I find most troubling and
inconsistent with Congress' command under Section 10 of the
Communications Act, to which I now turn.

**III. Requests for Forbearance**

Even if the language of the rate integration provision applies to CMRS
carriers, there are still substantial questions in my mind whether
Section 254(g) *should* be enforced against the most competitive and
dynamic segment of the telecommunications industry. But, the Order does
not demonstrate anything that can be called analysis of whether
competitive conditions are sufficient to effectuate the purposes or
concerns underlying 254(g) or the public interest. At bottom, the
discussion amounts to a summary denial on the basis that petitioners did
not meet what seems to be an impossible burden.[^6] Moreover, I fear
that the failure to forbear will actually harm the interests that
Section 254(g) seeks to protect. I discuss these points below.

**A. The Commission has the Burden to Justify Continued Regulation**

I believe that under the congressional forbearance scheme, the
Commission has an obligation to validate or justify continued regulation
in light of competitive conditions and cannot discharge that burden by
shifting complete responsibility to petitioners. It is becoming a
pattern at this Commission to set its own malleable standards of proof
in forbearance cases and then sit back and summarily dismiss petitions
for lack of proof.[^7] I believe Section 10 requires more. It requires
the Commission to come down from on high and itself except
responsibility for demonstrating with some rigor why continued
regulation is justified. It requires us to get our hands dirty.

The language of Section 10 sets forth the responsibilities of the
Commission affirmatively. The Commission, in subsections (a) and (b) of
Section 10, is directed to "determine" and "consider" certain things and
mandates forbearance ("shall") if the Commission determines that the
three enumerated considerations warrant. 47 U.S.C. § 160(a), (b). These
words suggest that the Commission has an affirmative duty to work
through, not whether forbearance is warranted, but whether the
challenged regulation is warranted any longer. For if it is not,
forbearance is mandated as a matter of law. Indeed, a petition for
forbearance "shall be deemed granted," whether or not it meets the
forbearance requirements, if the Commission does not deny it within one
year (plus 90 days, if extended). *Id.* § 160(c). Thus, I believe the
Commission must justify and defend the need for continued regulation
with more forcefulness. That is, the presumption leans in favor of
deregulation, not continued regulation, therefore, the proponents of
continued regulation (including the Commission) should bear a greater
share of the burden under Section 10 than this and previous orders admit
to.

Read in the context of the pro-competitive, de-regulatory 1996 Telecom
Act,[^8] I would suggest that under Section 10, once carriers show that
a market is competitive (their *prima facie* case), the burden should
shift back to the Commission to determine that enforcement of our rule
or a statutory provision is, in light of such competition, still
necessary to ensure that rates and practices are reasonable and not
unreasonably discriminatory. If it seeks to maintain enforcement, the
Commission must then show why the rule or provision is necessary to
protect consumers. Under the "public interest" prong of the forbearance
test, the Commission must thoroughly evaluate whether forbearance will
promote competition, which (among other things) may form the basis of a
public interest finding. 47 U.S.C. § 160(b).

Specifically, I submit that proponents of forbearance could make a
*prima facie* showing in its petition that the relevant product, service
and geographic markets for which it is seeking regulatory relief is or
is becoming competitive or that forbearance would promote competition.
Such a showing would identify the applicable markets, services,
licensees, providers, etc., and could include, among other things, data
or information identifying:

\(1\) the competitors in the market or markets;

\(2\) the competitive characteristics of a market such as consumer
choices, declining prices, increased subscribership, or increased
innovation; and

\(3\) the actual or likely competitive or consumer harms that result
from enforcing the rule or provision such as decreasing pricing
flexibility, increasing entry barriers or creating other artificial and
unnecessary constraints on conducting business.

Upon such a showing, there would be a presumption in favor of
forbearance from enforcing the rule or provision in question. Then, the
burden would shift to the opponents of forbearance and the Commission
(if it seeks to deny the forbearance request) to establish that
forbearance would, despite the competitiveness of the market, still not
meet the Section 10 criteria. If the Commission chooses forbearance, as
contemplated by Congress, it would determine that the forbearance
standard is met by reliance on the competitive circumstances
demonstrated by the carriers.[^9]

**B. Competition Should Enjoy a Greater Presumption than Regulation**

I continue to be troubled with the near-impossible evidentiary standard
that the Commission seems to demand petitioners meet. There seems to be
an assumption, more often than not, that regulation is superior to
competition for maximizing consumer welfare. We regularly express
skepticism that competitive conditions will guard against "unjust and
discriminatory rates," that it will facilitate deployment of services to
all Americans, that it will offer any consumer protection generally, and
that it simply is, too often, a threat to the "public interest." These
are laudable concerns, but the Commission too often asks petitioners to
disprove a hit parade of merely speculative harms while opponents of
forbearance seem to be granted the benefit of the doubt.

Why do we tend to agree at face value that regulation is "necessary to
provide. . .access to interexchange services at affordable and
nondiscriminatory rates?" Order at ¶ 28 (citing Alaska Opposition at
12). We undertake no evaluation as to whether competitive conditions
could (or do presently) produce affordable access to service, *at least
as well as regulation can*. Congress' commitment to competition reflects
its faith that competitive markets are effective tools for growth and
low prices, thus it is odd to be so skeptical about competition's
ability to serve these purposes. I also take umbrage that this Order so
often treats *different* rates synonymously with *discriminatory* rates.
*See, e.g.,* Order at ¶ 30. Rates can easily be different without being
discriminatory. They will be different, if there are different inputs
and costs. A rate is unreasonably discriminatory only if it cannot be
justified by the underlying economic costs. One may question whether an
economically sound, non-discriminatory rate is affordable to consumers.
And, if not, government can play a role to subsidize, in some way, the
costs. But, that approach should be extended only after it has clear
evidence that competition cannot drive prices down to values consumers
are able and willing to pay. In any case, "affordability" should be a
separate question from "discrimination."

We also have the tendency to state the purpose behind a rule or
provision and demand that petitioners prove conclusively that
competition will produce the results we desire (without any
consideration of whether it will produce those results at least as well
as do the existing regulations we administer). Simply sample some of the
statements made in this Order:

 "without rate integration, CMRS providers would, when consistent with
their economic interests, discriminate against the offshore points" (¶
29)

Translation: Without regulation, private firms and competition will
discriminate against certain populations. Competition, if healthy, will
discipline rates, keeping them in proportion to their costs. That is not
discrimination. I do not know how a petitioner proves to us that it will
not discriminate irrespective of competitive forces that would make it
difficult to do. What evidence is provided for the assertion that
competitive conditions will produce discriminatory pricing? I see none
in this Order. Indeed, for many years, CMRS carriers have set long
distance rates apparently under the belief that they were not subject to
rate integration. Yet, we rely on the speculative pronouncement about
discriminatory rates without looking to see in any detail if rates have
in fact been unjust and discriminatory in states such as Alaska and
Hawaii.

 "rate integration is necessary to ensure that nondiscriminatory
charges and practices are offered with respect to CMRS services to and
from the offshore points" and "there is no evidence to show that rate
integration is not necessary for the protection of consumers." (¶ 30)

In other words, petitioners fail to prove (with record evidence) that
competition can protect consumers as well as regulation. How do you do
this?

Competition and free markets are not simply regimes that allow firms to
profit at the expense of consumers. Trusting these devices is not to
abandon any concern for consumer in favor of money-grubbing,
self-interested firms. History and, more importantly, Congress have
judged that competition is a superior device for maximizing consumer
welfare. It, *generally*, keeps prices at levels consumers are willing
to pay, it *generally* promotes innovation in new products and services
for consumers, and it *generally* promotes growth into new and, yes,
even traditionally underserved markets. I emphasize *generally*, for
markets in any given snapshot in time will not be doing all of these
things equally well. Some markets will not yet be served, some prices
may still be high, but the grinding dynamic *generally* produces better
results. We cannot demand at one sitting total, ubiquitous, nirvana-like
satisfaction. It is not that competition is not yet ripe, it is that
markets and the capitalist system can never guarantee continuous and
universal results at any given moment in time. Though competition is not
perfect in maximizing consumer well-being, I challenge anyone to make
the case that regulation does it better.

**C. Not Forbearing In This Context May Actually Undermine The Purposes
Of Section 254(g)**

My pointed criticism of the lack of rigor shown in this Order with
regard to forbearance is driven, in part, out of a real concern that
failure to forbear may actually undermine the goals and objectives
embodied in Section 254(g) and the Telecom Act generally. Rate
integration is a form of universal service intended to facilitate both
ubiquitous deployment of service, including service to high cost and
rural areas, and "affordable" rates. But, given the competitive nature
of the CMRS market, it is not difficult to imagine that rate integration
may disserve these objectives.

Take, for example, the desire to promote expansion of service to high
cost areas. Many new CMRS services have emerged, logically, in robust,
low-cost, urban markets. In these markets, increasingly, one will find
fairly heated competition among up to five and six providers. Rates may
be quite low in those markets because of the lower cost structure and
the slimmer margins required to remain competitive. If a carrier is
obligated under the law to provide the same rates if it expands into a
rural or higher cost area, it may be unwilling to do so. The costs in
those areas may actually exceed the rates being charged in the
competitive market, or because of the higher costs, the margins that
would be possible due to rate integration make it impossible as a
business matter to go into those areas. Thus, contrary to the goal of
254(g), there exists a disincentive to expand into all regions of the
nation.

Conversely, rate integration may hamstring a carriers ability to respond
to price pressures in competitive markets. Lets say that Carrier A has
operations in two regions. One is a higher-cost area with little
competition (region 1) and it charges 12 cents a minute there for long
distance calls. The carrier also has operations in a lower-cost,
competitive market in another state (region 2), where it charges 10
cents a minute to remain competitive. Carrier B only operates in that
competitive market and, in order to compete against Carrier A, cuts its
price to 8 cents a minute for long distance calls. Under Section 254(g),
Carrier A is required to charge the same rate to its subscribers in both
region 1 and region 2.[^10] Thus, not only must it charge 10 cents in
each location now, but the carrier may be unable to respond with its own
8 cent offering in the competitive market because, as a matter
regulation, it would have to do the same in region 1, which it cannot
afford. Thus, the carrier faces a serious price squeeze, all due to
regulation. This example at least illustrates that the public interest
may not be served by the rate integration rule in the CMRS context. At a
minimum, it demonstrates that the Commission should have engaged in a
much more serious and comprehensive analysis than it did.

Furthermore, it seems likely that CMRS carriers have plenty of
flexibility to modify their plans in a manner that will avoid the rule
altogether. For example, the Commission does not regulate a CMRS
carrier's local airtime rates and other charges. Nor do the States.
Because of the wide-area nature of these services, it would not take
much to fold what are now "interexchange" calls into basic or "local"
rates, avoiding the reach of the statute.[^11] Similarly, carriers may
simply stop billing for long distance separately, which also avoids the
current rule's reach. Finally, the trend in this industry is toward
wide-area plans in which there is one, low flat rate for calling
anywhere in the country, thereby eviscerating any distinction between
local and "interexchange" service. "Great," one might say, "the market
will respond to this problem!" Yes, but innovation and markets should
develop tailored to the desires of customers, and not be skewed simply
to avoid government regulation.

We should also have explored whether enforcement of the rate integration
requirement dampens innovation. CMRS competition has delivered a steady
downward trend in all rates. CMRS is quickly becoming a substitute to
traditional local wireline service. These carriers compete with
incumbent local providers and traditional wireline interexchange
carriers by offering innovative and attractive price packages and minute
bundles (not to mention the technological innovations and add-ons). This
tit-for-tat has produced lower, flatter rates to which consumers have
greatly responded. Will rate integration inhibit price and marketing
innovation and price flexibility which are critical weapons in any
competitive industry?

These are the types of questions that should have been explored by the
Commission in this proceeding. If the Commission is serious about the
protection of the public interest I do not believe that it can simply
dismiss forbearance petitions without much study on the basis that
petitioners were unconvincing. I think forbearance requests require us
to actively evaluate continued regulation and not simply play the role
of judgmental skeptic when presented with pleas to cede regulation to
competitive conditions. I hope we will do better next time.

[^1]: ^?^ Rather, the Order takes us on a venture to the statutory
    definition of "telephone exchange service" and then to the
    Commission's policy decision to declare CMRS a "comparable service"
    to telephone exchange service because, "as a general matter, CMRS
    carriers provide *local*, two-way switched voice service as a
    principal part of their business." Order at ¶¶ 22-24 (emphasis
    added.) It goes on to come up with MTA as the relevant area, which I
    find nowhere in the plain language or legislative history of Section
    254(g).

[^2]: ^?^ *First Memorandum Opinion And Order On Reconsideration*, CC
    Docket No. 96-61, 12 FCC Rcd. 11,812 at ¶ 14 (1997) (emphasis
    added).

[^3]: ^?^ *See Chevron USA Inc. v. Natural Resources Defense Council,
    Inc.,* 467 U.S. 837, 842 (1984).

[^4]: ^?^ Of course, we must interpret a statute "flexibly \-- not in a
    sterile textual vacuum, but in the context of implementing policy
    decisions in a technical and complex arena," *id.* at 863, and we
    may change our interpretation of the statute, *id.* at 842. However,
    the Order includes no attempt to distinguish this approach from the
    earlier decision from just over a year ago and provides no
    justification for doing so \-- nor can I think of one it might
    provide.

[^5]: ^?^ In fact, no CMRS carrier commented on whether the rate
    integration policy applies or should apply to CMRS until the issue
    came up on reconsideration in connection with the affiliation
    question. This Order notes that we stayed application of the
    affiliation requirement, which "would benefit from a fuller record"
    in a separate proceeding. In addition, as the Commission recognized
    in its original rate integration Notice, the pre-1996 Act policy
    required interexchange carriers to offer service to subscribers in
    all fifty states, the U.S. Virgin Islands, and Puerto Rico on a
    rate-integrated basis. However, the Act\'s definition of "State"
    includes all U.S. territories and possessions, thereby extending \--
    geographically \-- the Commission\'s then-existing rate integration
    policy. The Commission sought comment on this specific issue.
    *Notice of Proposed Rulemaking*, CC Docket No. 96-61, 11 FCC Rcd.
    7141 at ¶¶ 77-78 (1996). Why cannot we stop here and take this same
    step before extending the rate integration requirement to a new
    class of carriers?

[^6]: ^?^ According to this Order, CMRS providers must:

    \-- "ensure that such rates \[that comply with the rate integration
    requirement\] will be offered by all CMRS providers in the future"
    (Order at ¶ 29);

    \-- provide "specific persuasive arguments on \[the\] record" that
    "rate integration would interfere with competition, resulting in
    less consumer choice" (*Id.* at ¶ 29);

    \-- show "that, in the absence of rate integration, CMRS rates will
    be just and reasonable and not unjustly or unreasonably
    discriminatory" (¶ 30);

    \-- "explain how the benefits of Section 254(g) can be attained if
    we forbear from applying the rate integration requirement of Section
    254(g) to the interstate, interexchange services of CMRS providers"
    (¶ 31); and

    \-- submit "record evidence to support that contention or,
    conversely, that competitive conditions will be promoted in the
    absence of rate integration" (¶ 34).

[^7]: ^?^ *See Memorandum Opinion and Order and Notice of Proposed
    Rulemaking*, Personal Communications Industry Association\'s
    Broadband Personal Communications Services Alliance\'s Petition For
    Forbearance For Broadband Personal Communications Services, 13 FCC
    Rcd. 16857 (1998) (recon. pending); *See also, id*., Statement of
    Commissioner Powell, dissenting in part.

[^8]: ^?^ *See* Pub. L. No. 104-104, 110 Stat. 56 (1996) (preamble to
    the Act) (directing the Commission to "promote competition and
    reduce regulation in order to secure lower prices and higher quality
    services for American telecommunications consumers and encourage the
    rapid deployment of new telecommunications technologies.") *See
    also* H.R. Conf. Rep. No. 104-458, 104th Cong., 2d Sess. 113 (1996)
    (revealing the congressional intent "to provide for a
    pro-competitive, de-regulatory national policy framework designed to
    accelerate rapidly private sector deployment of advanced
    telecommunications and information technologies and services to all
    American by opening all telecommunications markets to competition").
    Title IV of the 1996 Act (entitled "Regulatory Reform") included
    Section 401 (entitled "Regulatory Forbearance") and added a new
    Section 10 to the Communications Act, entitled "*Competition* In
    Provision Of Telecommunications Service" (emphasis added).

[^9]: ^?^ For CMRS carriers, the Commission could also take official
    notice of its findings in our annual Report to Congress on the state
    of competition among CMRS providers. *See* Implementation of Section
    6002(b) of the Omnibus Budget Reconciliation Act of 1993; Annual
    Report and Analysis of Competitive Market Conditions with respect to
    Commercial Mobile Services, *Third Report,* 13 FCC Rcd. 19,746
    (1998).

[^10]: ^?^ Section 254(g) provides that "a provider of interstate
    interexchange telecommunications services shall provide such
    services to its subscribers in each State at rates no higher than
    the rates charged to its subscribers in any other State."

[^11]: ^?^ From the example above, Carrier A could match the 8 cent long
    distance rate in the competitive market, adjust the long distance
    rates in the other market to 8 cents to comply with Section 254(g),
    and then (assuming competitive forces and other safeguards allow it)
    would raise local rates in the less competitive market to recover
    the additional costs in that market, as a result of regulation, from
    integrating its long distance rates.