While CLECs commemorate the third anniversary of the FCC's renowned line sharing and UNE-P orders, one RBOC asks the Commission's Wireline Competition Bureau to terminate those very rules.

by Patricia Fusco ISP-Planet Managing Editor [November 25, 2002]

Washington, D.C. is the scene of perhaps the most tenacious telecom lobbying since the U.S. Justice Department broke up AT&T in 1984. At stake is the future of the line sharing order that allows competitive local exchange carriers (CLECs) to obtain access to the high-frequency portion of the local loop from the regional Bell operating companies (RBOCs), and subsequent rules regarding the unbundled network element-platform (UNE-P).

On one side are the RBOCs—the local phone firms spawned from "Ma Bell's" break up—BellSouth, Qwest, SBC, and Verizon. On the other, feisty competitors of the RBOCs near-monopoly in local phone services—CLECs that have been joined by Covad Communications, WorldCom and even AT&T itself are attempting to keep key network elements unbundled and accessible. Caught in the middle is the Federal Communications Commission, the regulatory agency that approved the line sharing order and defined which elements of RBOC's network must be shared.

Get this party started
Covad is one of the companies born from the promise and vision of the line sharing order. This week, the company celebrated the third anniversary of the FCC's ruling.

Covad President and Chief Executive Officer Charles Hoffman said, "line sharing is perhaps the greatest proof point of the importance of competition in spurring widespread broadband adoption and the success of the Telecommunications Act of 1996."

DSL deployment has expanded rapidly since line sharing rules were instituted three years ago. In November 1999, there were less than 500,000 DSL subscribers in the U.S. Now, in November 2002, there are more than 5.5 million DSL subscribers, according to industry numbers.

Hoffman said that Covad would continue to press the matter with the FCC, which has been taking another look at the line sharing order as part of its regular triennial review.

"We continue to work to educate legislators on the importance of competition and innovation within the industry, and we believe that the FCC understands the value of competition for consumers," Hoffman said. "In fact, the adoption rate of DSL is faster than the cell phone adoption rate, thanks in large part to line sharing."

The party's over
As much as the line sharing order is acclaimed for encouraging broadband competition, it is equally blamed for the capital investment meltdown in the telecom sector. The RBOCs contend that the current rules governing line sharing and UNE-P force them to resell pieces of their local networks to competitors at or below cost.

SBC has gone so far as to propose a policy framework to the FCC that is designed to transition the industry toward what it feels is a "sustainable wholesale model for local telephone service."

William Daley, SBC president, said the industry and policymakers must come to terms with the best way to promote healthy competition.

"SBC recognizes that we must all work toward solutions that strike an equitable balance of interests," Daley said. "We have offered to the Commission a reasonable framework that will help bring certainty back into the market, establishes a healthy model for sustainable competition and which promotes investment in the nation's telecom infrastructure."

In its proposal to the FCC last week, on the anniversary of the line sharing order, SBC outlined its scheme for abandoning current competitive rules over the next 24 months. Specifics of SBC's proposal include:

• Establish a two-year transitional wholesale offering for serving residential customers that is functionally equivalent to the UNE-P at a nationwide rate of $26 per month, which does not include profit and certain other relevant costs
• Offer competitors 12-months in which to transition existing residential UNE-P customers to the new rate
• Eliminate the UNE-P requirements for business customers, effective upon the FCC's Triennial Review order date

SBC has proposed a two-year transitional period that it claims provides competitors with ample time in which to build their own facilities. In effect, SBC's plan is would eliminate competition in commercial-class broadband services immediately, phasing out all non-facility-based competitors by 2005.

The party line?
W. Scott McCollough, a tenured telecom attorney with Stumpf, Craddock, Massey & Pulman of Austin, Texas, said SBC's proposal is a direct attack on the FCC's mandate to encourage competition in the telecommunications marketplace.

"There is no difference between the unbundled network elements that deliver residential DSL services to homes and the unbundled network elements that deliver commercial DSL services to businesses," McCollough said. "By immediately eliminating competition in business-class DSL and voice services, SBC ultimately seeks to eliminate UNE-P rules entirely.

McCollough added that the idea that CLECs could build out in two years what SBC has built operating as a local monopoly since 1984, is complete lunacy.

"It's insane to suggest that every telephone company in the country should start tearing up the streets to build their own facilities," McCollough said. "We don't need to see 15 different telephone poles popping out of the sidewalk for every single telephone company to deliver last-mile connectivity. This would be an incredible waste of capital investments to build out the same system over and over again."

According to McCollough, the FCC is being heavily leveraged by the RBOCs because the line sharing and UNE-P rules are, in fact, working—creating real competition for the monopoly that was broken up in 1984.

"The UNE-P rules are creating real competition in the marketplace, fulfilling the FCC mandate of the 1996 Telecom Act," McCollough said. "If the RBOCs have problems with pricing they should go back to the states for relief. The U.S. Supreme Court has affirmed TELRIC (Total Element Long Run Incremental Cost) pricing and acknowledged the FCC's authority to define unbundled network elements, so the RBOCs can't really point to any charge related to line sharing that is forcing them to provide any wholesale service below their cost."

Based on Covad's analysis, nearly 80 percent of the nation's zip codes have access to broadband services as a direct result of three years of line sharing implementation. While the RBOCs continue their multimillion-dollar lobbying campaign, it's becoming obvious that the line sharing order has significantly spurred the deployment and delivery of DSL services in the U.S.

The FCC is expected to make its decision by the end of the year. Sources close to the discussion say that the Commission's primary concern is to reach a decision that will be legally bulletproof. The FCC wants to minimize the inevitable legal challenges that would follow any changes it might make to the rules. Which is one more good reason to stick with what's already been court-tested and approved—let the UNE-P and line sharing rules remain as they are and continue to foster the advancement of broadband services in the U.S.

— End