POWELL STILL FIRM ON ISSUING UNE DECISION BY FEB. 20

When reporter noted there’s been uncertainty whether court’s remand also called for vacating agency’s UNE rules, Powell said FCC had interpreted court decision as vacating UNE rules. Even if court didn’t intend to vacate rules, uncertainty about judges’ intent would be enough to disrupt local telecom market, he said. If incumbent LEC chose to stop providing UNEs after Feb. 20, long legal battle could ensue before clarity was reached, he said. “Who wants to test this?” Powell asked. “How do you find out? We'll have a fight in court for another 5 or 6 months.”

Industry source pointed out that FCC last year made conflicting statement about whether court had vacated UNE rules. In footnote in Oct. 8 order finding SBC liable for fine, FCC wrote that D.C. Circuit decision “does not undermine our analysis. The court did not vacate the UNE remand order.” Statement referred to same court decision that Powell said did vacate agency’s UNE rules. However, in Dec. when FCC sought delay in effective date of remand, agency indicated it thought court intended to vacate both line sharing and UNE order. In that filing, FCC noted lack of certainty about court’s intent but said that since original court decision stayed both items, it appeared its intent was to vacate both orders.

Best course is for FCC to get job done before deadline, Powell said. Asked whether agency might ask court to delay deadline for 2nd time, Powell laughed and said he doubted very much that court would agree to it. Court already has turned down FCC rules twice, refused rehearing, agreed to delay effective date, Powell said. Court understandably might be “grumpy” about request for 2nd delay, he said. Legg Mason analyst David Kaut interpreted Powell’s comments as “sending a message” to rest of commissioners that deadline couldn’t easily be extended, “a tactic designed to keep the pressure on his colleagues to come to a decision.”

In news briefing, Powell reiterated his strong view that ultimate goal of Telecom Act was facilities-based competition. Use of UNE platform always has been seen as entry vehicle and isn’t sustainable as long-term way of providing telecom service, he said. He said he didn’t “have concerns about every competitive carrier’s use of UNE-P” but he did have “grave concerns about the way [UNE-P] is taking hold in certain parts of the market.” One of most important issues for industry’s future is “what kind of competition we're building,” he said: “I've seen a lot of bubbles on my watch. I've seen [new service or technology greeted with] much enthusiasm only to have it blow up. We have an obligation to make sure the kind of competition [that develops] follows the fundamentals of economics and has long- term sustainability.” It doesn’t “do anyone any good if you get a flash in the pan” and say it represents competition, Powell said: “I'm not the only one telling people this is not sustainable. The capital market, Wall Street investors, are saying we don’t see how this works.” Everyone says UNE-P is transition but if some carriers view it as final product “then I am very opposed to it,” he said: “I don’t believe that model will work on a nationwide basis.”

Powell emphasized that agency’s review didn’t specifically look at whether to retain UNE-P as entity. UNE- P is combination of present set of UNEs, he said: “If any UNE can’t be justified under the [impairment] standard, there’s no UNE-P, not because you made an affirmative policy decision [against UNE-P] but simply because of what UNE-P is.” This is “supposed to happen” at some point as competition takes hold, Powell said: “At some point impairment starts cutting off” individual UNEs.

Powell told reporters he couldn’t comment on specifics of proposed UNE order that was being reviewed by commissioners. However, he said, one of his priorities is to solve “legal problems” that have caused courts to send UNE rules back to FCC twice. He said he sometimes was criticized for “always talking about legal issues” but: “I don’t have the luxury to tell a court to get lost. The trivialization of the legal framework [set by court] is irresponsible because that is not an option. We have to apply the standard in a way that we really believe is faithful to the D.C. Circuit opinion, which demands a heavy level of rigor.” -- Edie Herman, Brigitte Greenberg

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While Supreme Court failed to agree with FCC arguments that Commission was acting as regulator rather than creditor when it cancelled NextWave’s licenses, Chmn. Powell said Wed. that agency remained largest creditor in Chapter 11 proceeding. “Even though we're restricted because we're not a regulator in this process,” agency still is largest creditor “and the largest creditor in any bankruptcy still carries a lot of weight,” he said. NextWave bid $4.7 billion on PCS licenses and has paid FCC $500 million. U.S. Supreme Court Mon. sided with U.S. Appeals Court, D.C., ruling that overturned FCC decision to cancel licenses for missed payment (CD Jan 28 p1). Powell said ruling offered “a certain amount of finality,” which was positive. Asked about auction process that led to that outcome, he said that role of agency was to carry out law as set out by Supreme Court, but that ramifications of ruling “are troubling.” Economists who follow auction theory “will tell you it is a very troubling result that somebody would come to auction and bid with full knowledge that to hedge against risk you could run into bankruptcy and have that asset protected against the government taking it,” Powell said. One possibility raised by Supreme Court decision is what NextWave did, “which is excessive overbidding on spectrum, hedging against a risk by the confidence that you could insulate” those licenses in bankruptcy, Powell said. “I am now obligated to accept that that is possible under the law,” he said. “It doesn’t mean that I think the result is necessarily positive for auction policy or telecom policy.” Congress has potential conflict in how bankruptcy law could be read against telecom law in such cases. Powell said that in past members had expressed frustration that bidder such as NextWave could effect that result. “There’s a huge contingency up there that’s very upset that NextWave could insulate a public property in this way,” he said. “The challenge is if you're angry about it, let’s see the legislation to fix it. The irony used to be, ‘well, maybe the Supreme Court will fix it,'” he said. “Well, that’s now not going to happen.” Next step is that case goes back to bankruptcy court “to make sure the taxpayer gets paid,” Powell said.

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Powell told reporters he wouldn’t be attending Feb. 18 media ownership forum being sponsored by U.S.C. He said tight schedule and short notice of forum wouldn’t permit him to attend, but he said he was very supportive of such efforts. “The only reason that I'm not going is that these things are coming up within the range in which I have often made significant commitments to other events and I just can’t get to that one,” he said. Powell pointed out that Commission was sponsoring hearing in Richmond, Va., Feb. 27 and he recently attended forum at Columbia U. Powell said he didn’t think it was likely FCC would sponsor another “full- blown Richmond-type hearing” because of timing of getting item out by late spring and cost involved in putting hearing together. He also said hearings weren’t only way public’s voice could be heard, that there were more than 2,000 comments so far in proceeding and people could continue to make their feelings known through e-mail, mail and other ways: “I think that when we get to the decision point there’s going to be no doubt in my mind that we will have crisscrossed the country with opportunity to be heard in this proceeding, through hearings, through the record, through forums, through other means.” Other 4 commissioners have said they would attend forum in Cal. (CD Jan 28 p9).

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Powell said he didn’t know details of whether cable operators did or didn’t pass through broadcasters’ high- definition signals of Super Bowl but: “It would be a hazardous thing to suggest that any one incident along this tortured path of the DTV transition is compelling or indicative of an entire set of problems.” Powell said he thought there “will be steps forward and steps back” along way. His comments followed public spat between NAB and NCTA over whether cable operators passed through to consumers ABC’s HD Super Bowl feed. Powell said important thing was that at some point, both sides would have to come together. “All of you are going to have to give a little and get a little,” he said. Powell called dispute “unfortunate.”

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After Comcast’s decision to reject antiwar commercial that was to have aired in Washington during time frame of President Bush’s State of the Union address Tues. night, FCC Chmn. Powell said he didn’t think decision was necessarily indicative of “being big or not. I mean issues like that have been around… since the beginning of time.” Powell said he was sure Comcast had editorial authority to make decisions about which ads it would accept. Comcast had said it rejected commercial because it contained unsubstantiated claims. “I am skeptical about whether we have much authority,” Powell said. Center for Digital Democracy later issued news release complaining Comcast’s rejection of ad “underscores the problem we have in the U.S. because of media consolidation. An ever-decreasing number of conglomerates control access to TV,” said CDD Exec. Dir. Jeff Chester. He suggested Comcast’s real reason for rejecting ad was that it wanted to curry favor with Bush Administration.

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Powell said he had had some discussions with members of Congress about possibility of altering biennial review process to ease burden on agency. “But I don’t know if they'll do anything,” he said.

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While Powell said he had seen new cable ownership rules Media Bureau had been working on, item wasn’t yet in circulation on 8th Floor.