CABLES BEWARE FCC regulations can bite
By Andrew D. Lipman and Troy F. Tanner
Submarine cable owners and operators, and even holders of IRU or leasehold interests, who are not paying close attention to the latest rule changes of the U.S. Federal Communications Commission (“FCC”) may find themselves in shallow water without adequate FCC-bite protection. This is particularly true in today’s environment of economic uncertainty which leads to new creative ways of financing, restructuring, and disposing of excess capacity. It has become almost impossible to keep up with all of the potential scenarios for cable ownership and financing. Yet each new twist brings potential FCC licensing and regulatory liabilities. And with the dramatic drop in new licensing work, the FCC has turned its attention to enforcement issues, and has beefed up its fines for non-compliant licensees. Therefore, it behooves cable capacity owners to familiarize themselves with the latest FCC rules so that they do not find their cables on the receiving end of a big FCC enforcement bite. Below are several key regulatory pitfalls that can catch owners and carriers off guard, with suggestions on ways to avoid them.
New FCC regulations apply to a changed cable environment Three major developments dramatically changed the U.S. cable industry in the last decade — and as a result — the way the FCC 19
regulates submarine cables. The first was the introduction of privately financed, noncommon carrier cable systems, starting with the PTAT-1 cable system. The second was the wide scale opening of the U.S. market to foreign carriers as a result of the 1997 WTO Agreement on Basic Telecommunications Services. The third was the overwhelming rush of newly planned cable systems using major technological advancements such as Wave Division Multiplexing (“WDM”). Each of these new developments presented challenges to the FCC as to how cables should be licensed and regulated. By the end of the 1990’s, the FCC was under great pressure by the submarine cable industr y to speed up its processing of submarine cable license applications, while at the same time guard against anticompetitive behavior in the market. The financial success of Global Crossing’s first private cable, the promise of unlimited need for international bandwidth, and capital markets eager to invest, led the submarine cable industry into a building frenzy, with speed to market being extremely critical to success. In 1999, the FCC commenced looking at its licensing rules to see if there was a way to expedite licensing, while at the same time addressing private cable industry concerns that consortium-built cables were anticompetitive.