FCC Denies Qwest Petitions Seeking Forbearance Relief in Four Major Markets

On July 25, 2008, the Federal Communications Commission (FCC) released an Order rejecting forbearance petitions filed by Qwest Corporation (Qwest) pursuant to Section 10 of the Communications Act of 1934. Qwest's petitions sought certain forbearance relief as the incumbent wireline carrier in the four largest markets it serves—Denver, Minneapolis-St. Paul, Phoenix and the Seattle Metropolitan Statistical Areas (MSAs). The FCC's decision is a victory for competitive carriers, which will have continued access to UNEs, switched access and other Qwest services subject to the protections of dominant carrier regulation in these markets. The FCC's denial is significant because it indicates that the agency will require incumbents to meet a high standard before it will eliminate dominant carrier regulation, and stands in stark contrast to the FCC's earlier decision granting forbearance for Qwest in Omaha, Nebraska.

Specifically, Qwest sought forbearance in all four MSAs from: (1) applying certain dominant carrier rate and tariff regulations to its provision of mass-market and enterprise-switched access services; (2) applying Section 251(c)(3) obligations to provide unbundled access to loops, subloops and transport to competitors; and (3) Computer III requirements. Qwest did not, however, seek forbearance for its special access services in this proceeding. As Commissioner Copps explained in his concurring statement, the FCC's decision to deny Qwest's request sends a clear signal to prospective forbearance petitioners that the FCC is “cautious, even skeptical, of granting this kind of hurried and ill-considered relief.”

Forbearance from Dominant Carrier Regulation

Qwest sought forbearance from the following dominant carrier regulations to the extent they apply to its interstate mass-market and enterprise-switched access services; tariffing requirements and price-cap regulations, as well as dominant carrier requirements concerning the processes for acquiring lines, discontinuing services, and assigning or transferring control.

Qwest argued that, due to the extensive competition it faces, dominant carrier regulation is no longer necessary in the MSAs to ensure just, reasonable and nondiscriminatory rates and that market forces will protect the interests of consumers. Qwest based its estimates of facilities-based residential and enterprise-switched access line counts on its competitors' white pages listings data. However, the FCC, using a market-share test, determined that Qwest's market share in the MSAs is sufficiently high to suggest that competition in those areas is not adequate to warrant the requested forbearance.

The FCC's finding in this instance is in stark contrast to the favorable result Qwest obtained in 2005 for the Omaha MSA. In the Qwest Omaha Forbearance Order, the FCC allowed Qwest to escape its dominant carrier price cap, rate-of-return, tariffing, and 60-day discontinuance and transfer-of-control rules as they applied to Qwest's mass-market switched access and mass-market broadband Internet access services in the Omaha MSA. Commissioner Copps stated in his concurring statement, however, that the Qwest Omaha Forbearance Order was “based on some truly unique set of circumstances.”

Forbearance from Section 251(c)(3) Unbundling Obligations

Qwest also requested forbearance from UNE obligations. The FCC held that forbearance from the application to Qwest of the Section 251(c)(3) obligations to provide unbundled access to loops, subloops and transport to competitors in the four MSAs does not meet the standards set forth in section 10(a). Indeed, the FCC reasoned that Qwest is not subject to a sufficient level of facilities-based competition in the MSAs. The FCC did note, however, that the record evidence did show that cable operators have deployed facilities that meet the 75 percent “coverage” threshold in some wire centers. (“Coverage” is a metric for the number of households that a competitor could serve if asked by the end user to do so.) For that reason, the FCC explained, future relief from unbundling obligations might be warranted in such wire centers upon a showing of a more competitive environment in the MSAs.

Forbearance from Computer III Requirements

Finally, the FCC denied Qwest's request for forbearance from Computer III requirements. The FCC concluded that the record evidence did not demonstrate that the application of the Computer III requirements were not necessary to ensure that the “charges, practices, classifications, or regulations...for [] or in connection with [Qwest's local exchange and exchange access services] are just and reasonable and are not unjustly or unreasonably discriminatory.” For that reason, the FCC was unable to find that the forbearance from the Computer III requirements satisfied any of the criteria of Section 10(a).