Press Releases & Advisories
30 March 2009
W&G Team Leads Successful Effort to Reform FCC Fees for Undersea Cables
WASHINGTON D.C. (March 30, 2009) Following a multi-year effort led by a team of lawyers from Wiltshire & Grannis LLP ("W&G"), yesterday the Federal Communications Commission ("FCC") decided unanimously to reform the annual fees paid by undersea cable operators to the FCC in support of the FCC budget.
For years, the FCC's old fee methodology had harmed the undersea cable industry, whose cables carry more than 90 percent of international telephone and Internet traffic connecting the United States with international points. Paying a per-circuit fee dating to the pre-Internet era, the fees threatened to make uneconomic many undersea cable services and new cable construction. The fees were all-the-more anomalous given global deregulation and liberalization of undersea cable markets following U.S.-led efforts within the World Trade Organization, which unleashed exponential growth in undersea capacity along with plunging capacity prices since 1998.
Starting with fees due in September 2009, the FCC will now collect a flat fee for each undersea cable system, with discounted flat fees for smaller-capacity systems. The FCC eliminated the old, per-circuit fees, which wreaked havoc in the industry by creating perverse economic outcomes. In some cases, the fees due exceeded total revenues earned for particular capacity sales. Undersea cable operators will now be in a better position to price their services, recover their costs, and avoid the strategic behavior and "race to the bottom" that characterized the old fee regime.
The W&G team first alerted the FCC to the growing need for reform back in 2004. Working first on behalf of Tyco Telecommunications (which later sold its undersea cable network) and then Level 3 Communications, the W&G team worked to assemble an industry-wide coalition to develop a consensus proposal, which the FCC adopted in its entirety on March 24, 2009.
The W&G team was led by undersea cable regulation expert Kent Bressie, with support from Mike Nilsson, Chad Breckinridge, and Linda Coffin.