8.2 U.S. Regulatory Process

For an engineer, it is quite astonishing to realize that the chief architects of our networks are regulatory lawyers who have little understanding of layered protocols, statistical processes, or Maxwell's equations. Any company in the telecommunications industry should maintain a current understanding of the regulatory environment. Some major companies have large staffs devoted to regulatory activities, and at times may contract for more regulatory resources. It seems that every few years new regulatory policy causes fundamental changes to occur in the industry that can make or break the fortunes of certain companies. Equipment that once belonged to the service provider suddenly is classified as customer equipment, causing equipment vendors to develop different distribution channels for their equipment. Portions of the network infrastructure that were controlled solely by one company suddenly must be manageable by a multitude of service providers, causing sweeping changes in operational support systems. The opening of network interfaces have threatened equipment interoperability and reliability, requiring the industry standards bodies and the National Reliability and Interoperability Council (NRIC) to scramble to find ways to minimize service problems. Even for devices as simple as analog telephones, the quality of service has been compromised by some types of customer equipment in an unregulated environment. The regulator who does not understand the engineering implications of his or her policies is as foolhardy as the engineer who does not understand the implications of regulatory policy on his or her designs.

This book focuses on the regulatory environment in the United States. The regulatory situation for each nation is unique. The legacy telecommunications infrastructure, societal norms, government, and legal systems differ . The telecommunications deregulation trend began in the United States, but many countries are following this trend with a delay ranging from one to ten years.

The foundation of U.S. regulatory policy is the laws passed by Congress (see Figure 8.2). The Telecommunications Act of 1934 established a telephone service as a regulated monopoly. Later, the Telecommunications Act of 1996 established the basis deregulation with local service competition, including collocation in COs and line unbundling. The Federal Communications Commission (FCC) implements the laws by developing national rules and enforcing these rules. The FCC rule making involves a public review process that typically takes two to four years from the first notice of inquiry to an issued Report and Order. Following the Report and Order, parties can request reconsideration, and if the FCC deems there is sufficient merit, the FCC may issue an order on Reconsideration or a Memorandum Modifying an Order. Ultimately, FCC and state orders may be challenged in judicial courts. In some cases, FCC orders have been invalidated by court order.

Figure 8.2. U.S. regulatory process.

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Each state has a Public Utility Commission (PUC) that regulates services within the state, whereas the FCC regulates interstate services. State PUCs usually follow the policies developed by the FCC. Voice service providers must be certified in each state where they operate for the type of service offered. Regulated services must be tariffed in each state that the service is offered . The tariff process involves advance disclosure of the intended service, public comment, and review by the state PUC.

The telecommunications deregulation and unbundling process has generally been led by the United States, with many other countries following a similar course a few years later. The European Union required all its member countries to implement local access unbundling during 2001.

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