FCC Begins Reviewing Triennial Comments

Like sports fans taking sides before the game begins, incumbents and competitors lined up on opposite sides Wednesday with their filed comments relative to issues the Federal Communications Commission (www.fcc.gov) will consider during its Triennial Review of the Telecommunications Act of 1996.

By law, the FCC is required every three years to review the act and make appropriate revisions. During this year’s proceeding, it plans to take a close look at the list of UNEs incumbent carriers must provide competitors to see if some elements could be eliminated.

The incumbents have taken the position that unbundling rules and the UNE-P will be devastating to them, suggesting they will be unable to compete financially or invest into new technologies. And they have called the FCC to abolish regulations that force incumbents to sell portions of their facilities to competitors “at bargain prices.”

In its Triennial Review filing, SBC Communications (www.sbc.com) stated the current rules permit competitors to “cherry-pick only the most profitable customers without investing any capital and without deploying any facilities or networks.”

The RBOCs instead urged the commission to adopt policies “regulating unbundled network elements that will encourage true facilities-based competition and help improve the health of the telecommunications industry.”

While the FCC may have adopted the UNE-P regulations with the best of intentions, it “has had devastating, if unintended consequences,” SBC stated in its filing. “The UNE-P is, at the end of the day, simply a wealth transfer from incumbent facilities-based providers to companies that deploy and maintain no facilities or networks [and] that bring no competitive benefits to typical residential consumers.”

But competitors say this isn’t true. Led by organizations such as the Voices for Choices coalition (www.voicesforchoices.com), the Association of Communications Enterprises (ASCENT, www.ascent.org) and the CLEC Coalition, the FCC heard the cry that part of the reason for today’s telecommunications crisis is the way access charges are assessed.

“Overzealous unbundling and pricing regulations have caused phone companies and their competitors to invest less in the broadband network, helping to cause the current telecom mess,” charged the Voices for Choices coalition. Comprising the coalition are The Association for Telecommunications Services (ALTS, www.alts.org), Competitive Telecommunications Association (CompTel, www.comptel.org), Citizens Against Government Waste (www.cagw.org), Small Business Survival Committee (www.sbsc.org), Liberty Mutual (www.libertymutual.com), WorldCom Inc. (www.worldcom.com), Sprint Corp. (www.sprint.com) and AT&T Corp. (www.att.com).

And Voices for Choices co-chair Charlie Black encouraged the commission to look at what has happened since the Telecom Act was passed.

“The promise that the local phone networks would no longer remain this country’s last bastion of telecommunications monopoly produced one of the greatest floods of investment in history,” Black stated in a prepared release, which summarized the coalition’s position. “Are we to believe that all these vibrant competitors would somehow have invested more in creating new networks – if only they had been forced to pay the Bell giants higher fees?”

Black pointed out that because state officials in Michigan, New York, Ohio and other places rejected the RBOCs arguments and lowered access fees to “reasonable levels,” genuine competition and reform has occurred in those states.

The Voices for Choices filing also reminds the FCC the Bells have invested more than $100 billion in their networks since 1996, which should affirm that despite the Bells’ claims, the current system has brought about competition.

In its filing, ASCENT encouraged the FCC to retain the UNE-based service model because it has proven to be the “feasible market entry strategy in this difficult economic climate.”

ASCENT’s filing states: “CLECs should continue to have access to UNEs that comprise the UNE-Platform . based on the record in this proceeding, ASCENT believes that strengthening unbundling obligations, rather than reducing them, will best promote broadband deployment.”

The association also recommended a decision in the Triennial Review proceeding be deferred until a final verdict is reached on a case pending before the U.S. Appeals Court involving wholesale service rates and line sharing. The case conflicts with an earlier U.S. Supreme Court decision that affirmed the regulation that requires incumbents to provide competitors with UNE combinations.

Also addressing these legal cases in its filing was the CLEC Coalition, comprising NuVox Communications Inc. (www.nuvox.com), KMC Telecom Inc. (www.kmctelecom.com), TDS Metrocom Inc. (www.teldta.com), Core Communications Inc. (www.coretel.net) and SniP Link LLC. The law firm Kelley Drye & Warren LLP, which represents the coalition, stated in its filing that the FCC “must” adopt an unbundling framework that adheres to the Supreme Court’s ruling, because the high court interpreted Congress’ intention of encouraging competition.

The filing also says the commission should “create a federal unbundling framework with clear criteria for determining whether competitors are impaired without access to ILEC monopoly networks on an unbundled, cost-based basis.”

The judgment for impairment may be determined best at the state level, the CLEC Coalition’s filing also says.

In attempting to persuade the FCC to continue requiring access to local switching services, ASCENT stated that CLECs “definitely are impaired without the access.” The association explained: “To replicate the reach of the ILEC network, CLECs would need to overbuild the entire ILEC switching network . because ILECs have larger customer bases, they are able to leverage economies of scale and deploy such facilities in a far more efficient manner than a start-up CLEC ever could. Clearly, these circumstances combine to demonstrate how CLECs would be materially impaired if unbundled local switching were no longer made available to them.”

ASCENT also emphasized that UNE-P promotes the goals that Congress had in mind with passage of the act. “Clearly, UNE-P providers have fulfilled the intent of the act by rapidly entering the market and serving a large number of customers .”

And the association stated that UNE-P is successful and should be preserved because it addresses fundamental operational problems and extreme costs associated with implementing new switches.

Despite what competitors believe is overwhelming evidence to support their arguments, the ILECs counter that only a handful of carriers, such as WorldCom and AT&T, would. Hence, they call for the commission to:

* Free all LEC broadband network investment from unbundling obligations;

* Reject efforts to expand UNE rules into already competitive markets;

* Eliminate UNE requirements and the UNE-P at artificially low wholesale rates where competitors have available alternatives;

* And, prevent states from adding their own unbundling obligations beyond those the FCC.

SBC’s senior vice president FCC Priscilla Hill-Ardoin stated in a release explaining the incumbent’s position: “These rules were put in place six years ago with the best of intentions by regulators to `jump start’ competition in local markets. Six years later, these policies are having significant negative unintended consequences.”

She insists the current regulations discourage investment, hinder real competition and contribute to the turmoil of the telecommunications industry.