TALK OF LAWSUITS, LEGISLATION FOLLOWS FCC RULING ON UNE

While many complained that the ruling didn’t provide regulatory certainty that telecom industry needed, they said it certainly would lead to months of actions in appeals courts and state PUCs. “There’s not a telecom lawyer or lobbyist in the country who’s not planning on having a happy Christmas,” said Steve Davis, Qwest senior vp-public policy, on months of legal action sure to follow ruling.

Verizon is likely to take the FCC’s new unbundling network element rules to court, Thomas Tauke, senior vp- public policy & external affairs, told reporters Thurs. “I expect we will challenge this in court,” he said, noting the company still was awaiting release of final order. “It is clear to us at this point, from what we know, that FCC has moved in a direction that is inconsistent with the statute and inconsistent with what 2 previous court decisions have addressed.”

Among the concerns that Tauke raised about split FCC vote was that company wouldn’t be able to retire copper loops or subloops without going to states for approval first. “We don’t have that kind of requirement now,” he said in conference call. Part of Commission’s decision that covers unbundling for loops using fiber facilities appears to be effort to require companies such as Verizon to maintain 2 networks -- copper one for competitors and fiber one that it could use to offer service. “If we must maintain a copper network when we build a fiber network, this takes away much of the financial incentive to do so,” Tauke said. Federal appeals court twice has turned down previous FCC attempts to write unbundling rules, Tauke said. “The FCC it seems had an opportunity here to get it right the 3rd time. They have had 2 chances,” he said: “Clearly the FCC in the past has ignored statutory directives by Congress and been overturned. Today they came up with the same thing again. There isn’t much hope that they're going to have a different outcome again.”

“Having another round of litigation is in no one’s interest,” Tauke said. “If we cannot get the FCC to follow the dictates of the statute, then obviously we have to turn to the courts to again overturn the FCC rules,” he said. Tauke said FCC appeared to have “completely” sidestepped rules on unbundling and creating clear standard for determining impairment. “It’s not just that the states have been given a role in implementing the FCC decision, it’s that the states have been asked to make the decision,” Tauke said. He particularly bemoaned what he said were inconsistencies between analyses in different parts of order as described in news release. Release said that on one hand, hybrid loops wouldn’t be unbundled for broadband purposes but elsewhere order summary said subloop unbundling was required for copper loops, Tauke said. “The only time you have a copper subloop is if you have a hybrid loop of copper and fiber,” he said, questioning how there could be subloop unbundling if there was no unbundling for hybrid loops.

Tauzin blasted FCC’s decision, saying it “points out the need for Congress to enact new legislation designed to promote real -- not phony -- competition in the marketplace.” He said decision was “body blow to the American economy” and criticized FCC Comr. Martin for siding with Democratic members of Commission. Tauzin said he believed FCC’s ruling was heading for “judicial junk pile.” “Fortunately, the courts have a better understanding of the Telecommunications Act than Mr. Martin and his proregulatory soulmates at the FCC,” Tauzin said. He was very critical of Martin, at one point saying he was “ideological brothers” with former Clinton-era FCC Chmn. Reed Hundt and William Kennard. He said regulatory reform was “stabbed in the back” by Martin.

While Tauzin talked of need for new legislation, House Commerce Committee ranking Democrat Dingell (Mich.) acknowledged ruling was in line with proposed Tauzin-Dingell act. He said decision should lead to creation of jobs, investment and more service in broadband. But he agreed with Tauzin that allowing UNE-P to continue essentially “sacrificed the cornerstone and intent of the 1996 Act -- real competition among facility-based competitors.”

Disappointment with ruling was spread across political spectrum, with each side citing different reasons for disappointment. House Telecom Subcommittee Chmn. Upton (R- Mich.) joined Tauzin and Dingell in expressing disappointment but made no mention of broadband provisions. Telecom Subcommittee ranking Democrat Markey (Mass.) also expressed disappointment, but with broadband provisions. “For future-oriented broadband telecommunications services, the FCC shatters the procompetitive premise of the Telecommunications Act and replaces it with a policy embracing a ‘digital detente; the cozy existence of a cable company versus Bell company broadband duopoly,” Markey said. House Judiciary Committee ranking Democrat Conyers (Mich.) said FCC Chmn. Powell’s willingness to “re-monopolize” telecom industry at expense of competition was questionable and warranted hearings in Judiciary committee.

Senate Commerce Committee Chmn. McCain (R-Ariz.) issued cautious statement, saying Commission “appeared” to take meaningful step to deregulate broadband, which could lead to new jobs and investment. However, he stressed need to study ruling before making judgments. Senate Commerce Committee ranking Democrat Hollings (S.C.) expressed disappointment that FCC didn’t reach consensus and that vote was split. “While previous Commissions have been able to set aside differences, I fear that the Commission today has missed an important opportunity to speak with one voice and to provide the telecommunications industry with greater certainty,” Hollings said.

While CLECs, IXCs and consumers said ruling was both good and bad for them, nearly all Bells and ILECs focused on UNE-P and had fleeting, if any, mention of broadband portion of rulings. USTA Pres. Walter McCormick was one of few who even mentioned broadband. “Had they been as forward-looking with regard to switching and UNE-P as they were with line sharing and broadband, all of America would have benefited, but instead, the regulatory landscape is left uncertain and the economy is left to stagnate,” McCormick said.

AT&T called it “difficult compromise” and Voices for Choices said it was “mixed bag for consumers.” Even Promoting Active Competition Everywhere (PACE) Coalition, which represents UNE-P-based CLECs, said FCC could have done more to promote competition. “We believe the FCC should have made [UNE-P] available nationwide,” PACE Chmn. Peter Karoczkai said. “We are confident, however, that state proceedings will result in decisions mandating the continues availability of UNE-P.”

RBOCs and ILECs said they didn’t believe shifting action on impairment back to states would withstand judicial muster. SBC Pres. William Daley said FCC’s ruling appeared to “fly in the face” of U.S. Supreme Court and U.S. Appeals Court, D.C., rulings. Davis said FCC had set up “regulatory morass of simultaneous state proceedings using ill-defined procedures.” He said ruling was bound for Appeals Court and would tie up both state and federal regulators and courts for months to come.

While CLECs and IXCs expressed concern about how ruling would affect their efforts to provide broadband, they did take solace in fact that UNE-P wasn’t taken off table. “While the decision grants the incumbent monopolies far more deregulation than warranted, it also should permit AT&T and other carriers to continue to deliver competitive voice and broadband services,” AT&T Gen. Counsel James Cicconi said.

MCI Mass Markets Pres. Wayne Huyard said FCC’s ruling would allow his company to continue to offer its bundled local and long distance plan, “The Neighborhood.” AT&T said decision “clearly” met requirements of Telecom Act and Appeals Court ruling. Cicconi said: “That decision requires a granular analysis of local markets conditions in connections with unbundling determinations, which today’s decision achieves.”

Telecom equipment manufacturers believed more broadband deployment would occur as result of ruling. FCC Comr. Martin said Commission adopted broadband proposals along lines of those proposed by High Tech Broadband Coalition (HTBC), alliance of leading trade associations for telecom and computer manufacturers. “This step represents a major triumph for the consumers of this country, who stand to benefit from high-quality, widespread and affordable broadband services,” HTBC said.

TIA said FCC’s action would remove “serious economic disincentives” to investments in telecom networks, particularly DSL lines. “In some situations, this likely will mean extending the reach of their [DSL] networks to reach more potential customers,” TIA Pres. Matthew Flannigan said: “It also affords them an opportunity and incentive to make the great technology leap many have been waiting for: fiber-to-the-home.”

Some said they didn’t foresee Bells investing in broadband rollout, even though regulatory environment now favored them. “I don’t think the Bells will deploy more broadband as a result of this decision,” said Russell Frisby, pres. of CompTel, which represents local telecom competitors. “All it will do is result in higher prices.”

PUC comrs. said they would be looking to FCC order for guidance on how to review UNEs. David Svanda, NARUC Pres. and Mich. PUC comr., said he didn’t foresee wide variety in states in their UNE review. Brad Ramsay of NARUC said he believed FCC would be able to craft order in way that would survive court scrutiny.