New Networks Institute & Teletruth News Alert. September 8th, 2009



Related Documents and Links:


CASE STUDY: How Regulations Designed to Help Small Business Competitors

Failed to Work and Harmed Broadband, Competition, Customers, Innovation, and

the Economy. Teletruth Requests New Proposed Rulemaking Actions the FCC

Should Take to Fix Future Problems.


*     How did AT&T and Verizon become 'very small businesses' to bid

      on 'small business' wireless spectrum? 

*     Is using data from 1992 or 1997 about current market competition


*     Did the FCC know they would be harming competition when they wrote:

      "the majority of these firms are small entities that may be affected

      by our action".


The FCC is currently seeking comments regarding --- "Possible Revision or

Elimination of Rules under the Regulatory Flexibility Act".


The Federal Regulatory Flexibility Act of 1980 (as amended) requires all

federal agencies, including the FCC, to ensure that the regulations they

enact do not directly harm small businesses. The agencies are also required

to create essentially an impact study, known as the Regulatory Flexibility

Analysis, to determine if their new rules will harm small competitors.


We argue that the previous FCC Administrations' failure to take the

Regulatory Flexibility Act (RFA) obligations seriously since 1998, combined

with an overwhelming disregard for accurate data, removed America's

broadband, telecommunications, Internet, wireless and even media

competition. It has cost America trillions of dollars in potential economic

growth, harmed innovation and slowed America's technological edge, not to

mention closing down thousands of competitors. It also resulted in higher

prices, slower broadband speeds, and a lack of choice for customers.


In short, it has let AT&T, Verizon, Qwest and the cablecos to take control

of the regulatory agency's decisions, to the detriment of the US economy. We

are, after all, 15th in the world in broadband for a reason.


Teletruth requests the FCC create the following proposed rulemakings:


.     Investigate the previous FCC's violations of the Regulatory

      Flexibility Act & the Data Duality Act, and revamp the current

      process and data collection.

.     Undo the rule that "eliminated mandated sharing requirement on

      AT&T, Verizon and Qwest's wireline broadband internet access". (line


.     Reinstate the rules related to unbundling (wholesale) obligations of

      AT&T, Verizon and Qwest, the local exchange incumbents.

.     Get refunds of all of the fraudulent small  business "designated

      entity" discounts garnered by AT&T, Verizon, T-Mobile and others, from the FCC's wireless spectrum auctions, and open that spectrum for small       business competitors.


The Regulatory Flexibility Act should have been a tool that the FCC and

others could use to balance the voices of the well-financed incumbents and

help the FCC create accurate impact studies, which would have informed the

FCC of the potential harms that would occur if the FCC proceeded in creating

laws that eliminated small business competition on wireline and

wireless services.


Congress also made sure that there were provisions in the Telecommunications

Act of 1996, (Section 257) so that small businesses could compete in

telecommunications and information markets on a level playing field by

"eliminating... market entry barriers for entrepreneurs and other small

businesses in the provision and ownership of telecommunications services and

information services". And the FCC is supposed to fulfill these obligations,

with a national policy to "promote the policies favoring diversity of media

voices, vigorous economic competition, technological advancement".


In fact, the largest growth in telecommunications, broadband and the

Internet in American history was created, not by the incumbent phone

companies (now AT&T Verizon, and Qwest), but by the thousands of independent

Internet providers and competitive data-local exchange companies (DLECs).

These entrepreneurs brought America online, and helped to create new

products from VOIP and DSL, to making sure customers could use email and the

World Wide Web.


As we will show in our case study, because the FCC failed to properly

implement the Regulatory Flexibility Act's statutes, there were new rules

created that had direct harms to small business competitors in virtually

every area of telecommunications, broadband, Internet, wireless and even

media consolidation.


Therefore, we are asking the FCC to expand the examination of 'rules' to a

more important examination - that the Regulatory Flexibility Act, including

the data used, harmed small businesses and the FCC should initiate a Notice

of Proposed Rule Making to help this FCC revamp the methodology, process,

data collection and analysis.


We address 4 areas of contention.


A) Investigate the previous FCC Administrations' violations of the

Regulatory Flexibility Act & the Data Duality Act and revamp the current

process and data collection.


In the FCC's Reg. Flex. analysis in multiple dockets, the FCC included this

identical sentence in 13 different market descriptions:


"the majority of these firms are small entities that may be affected by our



It seems the FCC knows its decision may cause direct harms, yet doesn't seem

to care. But it gets worse. The FCC is required to essentially do a market

impact study on how their current rulings will harm small competitors. The

paragraph below, with information from 1997, was used in multiple, recent

FCC analyses to show that the current market is competitive. -- It is over a

decade old.


"Wireless Communications Services: This service can be used for fixed,

mobile, radiolocation, and digital audio broadcasting satellite uses... The

Commission auctioned geographic area licenses in the WCS service. In the

auction, held in April 1997, there were seven winning bidders that qualified

as "very small business" entities, and one that qualified as a 'small

business' entity."


The FCC has lots more recent data on wireless spectrum because of its need

to approve license transfers. As we show, these licenses have changed hands,

sometimes more than once, and the wireless spectrum is far more concentrated

now than it was in 1997, often shutting out the small business competitor.


From the use of decade-old data as 'boilerplate' in multiple dockets, the

FCC's failure to even discuss alternatives of small entities being affected,

or other basic processes, such as proper notification of impacted small

businesses, the FCC needs to comply with the Regulatory Flexibility Act and

Data Quality Act tenets.


B) Undo the rule that "eliminated mandated sharing requirement on

incumbents' wireline broadband internet access". (Line Sharing)


Because of a failure of the FCC's Reg. Flex. analysis, the FCC

created irresponsible laws that blocked Internet Providers and DLECs from

moving their customers to higher-speed services, such as DSL or the new fiber-based services.  These rules need to be reversed.


If we are expecting a national broadband policy to work, it needs

to understand that competition and entrepreneurs, not the incumbents, drove

the economy, innovation and cared about the customer.


In fact, it is clear that some problems, such as Net Neutrality, arose only

after the consolidation of Internet and broadband services by the cable and

phone companies.


C)) Reinstate the rules related to unbundling (wholesale) obligations of

AT&T, Verizon and Qwest, incumbent local exchange carriers.


In 2004, competition was dead in the water after the FCC ruled to remove

competitors' ability to purchase wholesale local service (known as UNE-p) at

reasonable rates.  By 2004, AT&T and MCI, the 2 largest competitors, had

over 17 million customers getting competitive service. However, the FCC

removed the rights of these companies to get wholesale services at

reasonable rates. Both companies were put up for sale, and wireline

competition plummeted 60%.


Had the FCC actually followed the requirements of the Regulatory Flexibility

Act, it would have noticed it was essentially killing off the 2 largest

competitors who offered choice, not to mention hundreds of other companies.


D) Get refunds of all of the fraudulent small business 'designated entity'

Discounts from the FCC's wireless spectrum auctions and open that spectrum for small businesses.


Is AT&T, Verizon and the other large wireless carriers 'very small

businesses'? By creating false-front 'small business' groups, known as

'Designated Entities', AT&T et al got over $8 billion dollars in small

business wireless licenses. There was no tracking of the licenses and no

serious analysis of the harms to the small business companies who did not

win the bidding.


Also, the FCC's data in the Reg. Flex. for wireless services were from 1992,

1997 and other ancient data that essentially condemned the small business

bidders who wanted spectrum. The Reg. Flex. analysis was boilerplate, used

in multiple proceedings, and there was no 'current market analysis' or even

tracking of what happened to the companies since 1992, etc.. Instead, a

sleazy act by AT&T, Verizon and others was carried out where they could

play-act as 'very small businesses' and they could take control of the

wireless markets.


Note: Teletruth, New Networks and others, have been filing comments,

complaints and even filing petitions pertaining to small business issues

since 1998. They have all gone unheeded. Teletruth currently has an 'active'

Reg. Flex and Data Quality Act challenge filed in 2008.


To read our previous work.   


TO READ OUR FULLCOMMENTS, including our case study: