AT&T, Verizon Butt Heads over UNE-P

Verizon Communications Inc. (www.verizon.com), the No. 1 U.S. local phone company, insists the unbundled network element – platform resale model is “synthetic” competition as it pertains to the 1996 Telecommunications Act.

UNE-P does not promote facilities-based competition as the Act envisioned and the U.S. Court of Appeals for the District of Columbia Circuit recently affirmed, said Ed Young, senior vice president of federal regulatory affairs, Verizon.

To bolster his argument, Young said AT&T Corp. (www.att.com) stopped making investments in New York after regulators lowered the wholesale rates Verizon could charge to lease its local network.

“Our experience in New York is they ride the Verizon network,” said spokesman Bob Bishop.

AT&T chairman and chief executive C. Michael Armstrong tells a much different story. Speaking before the American Enterprise Institute Tuesday, Armstrong pointed to AT&T’s investment in New York facilities since regulators slashed wholesale rates, according to an AT&T statement. AT&T has invested in switches and fiber to commercial buildings, spokeswoman Lenora Vesio said.

UNE-P ultimately facilities a transition to a facilities-based model by first allowing a carrier such as AT&T to “gain scale in customers and revenue,” Armstrong said.

The war of words between AT&T and Verizon likely will escalate as state regulators mull over future rulings that could shape the fate of the companies’ regimes.

On Tuesday Verizon filed new wholesale rates with the Pennsylvania Public Utility Commission. Vesio said the rates are “inflated” and “unrealistic” based on past investments. The PUC is expected to issue a decision this summer.

From California to New York state public utility commissions have slashed the UNE-P rates the regional bell operating companies can charge competitors to lease their networks.

Last month, California cut the rates to lease unbundled network elements by more than 40 percent, and AT&T intends to lobby for additional price cuts on switching and local loop elements before a final ruling is made sometime next year, AT&T spokesman Gordon Diamond said. AT&T plans to enter California in the third quarter.

Armstrong said Tuesday AT&T would be able to offer more than half the Bell companies’ residential customers local phone service by the end of the year if regulators in a few critical states set UNE-P rates that make it economically viable to compete. Armstrong pointed to Arizona, California, New Jersey, Virginia and Pennsylvania.

Where AT&T does provide local residential service, the company has proved successful, say executives. For instance, AT&T has acquired 100,000 local phone customers in Michigan since entering the state three months ago, Armstrong said. AT&T began offering residential local phone service in Ohio this week. The company also provides residents local service in Georgia and Illinois.