UNEs 8-8-02

August 8, 2002

U.S. Courts, FCC's Review of UNEs Create Confusion, Controversy

Are parts of incumbent networks available to competitors or not? That's the question still lingering throughout the industry as the FCC's continues its triennial review, initiated last December, of its policies on unbundled network elements (UNEs), and seeks rehearing of a recent D.C. Circuit decision overturning its UNE rules.

The FCC’s first triennial review of UNE policies was specified in its UNE Remand Order in 1999 and originated with the Telecommunications Act of 1996. The Act directed the FCC to determine what network elements ILECs must make available for lease to new CLECs and IXCs looking to enter the local exchange business.

Complicating matters, however, are two recent court decisions. A Supreme Court decision in May ruled that unbundling is not only permitted, but required by the 1996 Act. Less than two weeks later, the D.C. Circuit Court issued a contradictory ruling setting aside and remanding further consideration of the FCC's 1999 decision on network element unbundling, and remanding the FCC's line sharing order.

In response, the FCC has moved for a rehearing before the D.C. Circuit of its recent decision, which Robert Bork, a prominent legal figure acting at AT&T’s request, had assured them the Supreme Court would be willing to overturn. The Commission also extended the comment period for the triennial review for UNE pricing.

“It’s a pretty bad decision,” Billing World quotes John Windhausen, president of the Association for Local Telecommunications Services (ALTS), as saying of the lower court’s opinion. “The most interesting thing is that [the D.C. Circuit] decision goes 180 degrees from the Supreme Court’s TELRIC decision.”

In the D.C. Circuit case, the Bells argued that the regulations are flawed because they apply to any region regardless of the level of competition in that region. They also argued that they face competition from other technologies, such as cable companies that sell high-speed Internet and local phone service.

According to Windhausen, ALTS plans to gather more region-by-region data on competition. “We’re going to have to come up with more facts, market-by-market, to show that the Bells have a monopoly,” he says. “We’re asking members to give input, and we’ve commissioned a study to start looking at some of the specifics. But at the end of the day, we think it could work out for us. A closer look at the facts will show there’s no alternative to the Bell companies in 90 percent of the markets.”

A number of existing CLECs and IXCs argue that the FCC's review will now likely cause more confusion in a market already beset with a lack of investor confidence in the competitive landscape. KMC Telecom, a competitive provider that serves second- and third-tier business markets throughout the eastern half of the U.S., has a large, facilities-based network with facilities in 35 cities. KMC still uses UNEs as an interim solution where its fiber can't reach.

"I think that the whole triennial review . . . puts uncertainty out there . . .” America’s Network quoted Mike Duke, KMC Telecom's director of government affairs as saying. “People are wondering if the rules are going to change." "We have taken our fiber into a number of buildings, but with capex being limited each building has to be proven in. The quickest and most cost-effective way in the short term is to lease unbundled loops, and if that was taken away we would not be able to grow at all."

AT&T is in a somewhat similar situation, according to America’s Network. Already competing in the residential local phone markets in Georgia, Illinois, Michigan, Texas, New York and Ohio, the IXC plans to enter the California market in the third quarter if California regulators move to cut SBC's wholesale UNE prices by 40 percent. In its filing, AT&T said that the availability of UNEs does not create disincentives for the Bell companies to invest in their infrastructure.

On the other hand, the Telecommunications Industry Association believes that is what is holding back mass-scale deployment of last-mile services. As part of its recommendation filed with the FCC, the TIA argues that while the FCC should continue to require that ILECs provide access to collocation space and unbundled access to their legacy copper facilities, it should not apply the unbundling obligations to newly built broadband facilities.

Sources: America’s Network, Billing World, FCC.

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