(CN) – The Federal Communications Commission must reconsider its 2007 refusal to let Verizon raise wholesale prices for local competitors in six metropolitan areas on the East Coast, the D.C. Circuit ruled.
Verizon argued that the FCC had departed from precedent in applying a “newly minted bright-line market share test” to determine if those metropolitan areas were sufficiently competitive to allow Verizon to bypass unbundling requirements.
“We agree that this test departs from FCC precedent by relying solely on actual, and not potential, marketplace competition,” Judge Sentelle wrote.
Congress hoped to break up monopolies by passing the Telecommunications Act, which authorizes the FCC to require incumbent local exchange carriers, such as Verizon, to allow competitors to use their infrastructure.
Incumbent service providers can file a “forbearance petition” – a petition seeking restraint from regulatory enforcement – if they can demonstrate that competitors have the ability to compete using their own facilities.
Verizon filed forbearance petitions in 2006, claiming competitors could amply compete in markets in Boston; New York; Philadelphia; Pittsburgh; Providence, R.I.; and Virginia Beach, Va.
The FCC denied the petitions in 2007, but the federal appeals court in Washington, D.C., vacated and remanded on Friday, urging the agency to give a more “reasoned explanation.”
“The court’s decision confirms that the FCC applied the wrong standard,” said Michael Glover, Verizon’s vice president and deputy general counsel.
FCC Acting Chairman Michael Copps said the agency would thoroughly review the case. “We always strive for a rigorous analysis,” Copps said in a statement. “We are confident of our ability to do just that.”