December 2002
UNE Rules Approach, Debate Intensifies
With the FCC entering the home stretch in its "triennial review" proceeding to develop new rules on unbundled network elements (UNEs), the public debate among carriers and states has intensified, as well as visits and letters to FCC staff in attempts to influence the outcome. The UNE rules evolved from the 1996 Telecommunications Act to provide a way for local competition to develop through wholesale purchase and use by CLECs of RBOC network facilities. The RBOCs hate the rules, while many CLECs, including AT&T and WorldCom, rely on them to provide local service.
The FCC expects to complete the triennial review proceeding by year-end or early in 2003. The Commission may take steps that would limit the availability of the UNE platform (UNE-P), in part, by restricting state commissions' ability to make it available, sources told Telecommunications Reports. An FCC staff committee is finalizing an "issues and options memo" on UNE-P that will be sent to Chairman Michael K. Powell's office for review before it is forwarded to the other Commissioners.
But state commissions are pushing to retain their role in the UNE process. NARUC sent a letter to the FCC last week, signed by 80 state commissioners, indicating their support for continued state flexibility to maintain UNE-P as an entry strategy, as well as the ability to add to a national list of UNEs.
Moreover, carrier executives and representatives are losing no opportunity to sway FCC and industry opinion on the matter. At the annual UBS Warburg conference last week in Manhattan, Verizon Communications’ CEO Ivan Seidenberg heavily emphasized the barriers presented by UNE-P, describing the policy as “maddening and destructive.” He went as far to claim that carriers who rely on the UNE-P model are destined to fail because they “don’t control quality.” SBC Communications CEO Ed Whitacre also anticipates changes in UNE-P so that it will provide a more fertile environment for capital investment that would lead to increased facilities-based competition.
In stark contrast to the RBOC view, Dave Dorman, the CEO-elect at AT&T stated that the Bells’ hopes of retaking sole control of local lines is like “retrading the ‘quid’ in the quid pro quo,” explaining that incumbents agreed to provide competitive access in exchange for entry into long distance. “UNE-P has proven to be a valuable tool for opening up competition,” he said. AT&T has more than 2 million UNE-P customers in eight states. The carrier expects to enter between six and nine states by the middle of next year, on the way to tapping into 70 percent of RBOC local markets, according to Dorman.
Meanwhile, carrier representatives have been chewing the FCC’s ear. The week before last, representatives of Verizon met with Chairman Powell and his Legal Advisor, Christopher Libertelli, to discuss how reform of the Commission's UNE and broadband policies are critically important to reinvigorate investment in the telecom industry and how the current unbundling rules are destructive to investment and the long-term competitiveness of the industry. Representatives of SBC also met with Libertelli, describing why it is reasonable, efficient and practical for CLECs to purchase their own loop concentration equipment for use in their networks; however, if an ILEC has to deploy new equipment to support UNE loops, then the ILEC should be able to recover costs up-front.
Contradicting these views, representatives of AT&T spoke with Commissioner Martin to emphasize that UNE-P is essential for competition in the provision of local telecommunications services to residential and small business customers, and that loop access and provisioning difficulties along with loop, collocation, transport, and related costs continue to preclude the deployment of competitive switches. AT&T also discussed the important role of the states in fostering competition in local markets, the central role states should play in any determination to "de-list" UNEs, and AT&Ts views concerning preemption of the states.
The wait for the UNE-P decision has left a lot of CAPEX sitting on the sidelines, says Doug Bulleit, chief strategist for BellSouth. "My guess is that UNE-P will be a quid pro quo, (King) Solomon kind of decision," Bulleit says. "The boundary line will move and regulation will become a different package of UNE-L or UNE-transport. These policy decisions have a huge effect on where capital goes and who gets funded."
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