Bells, CLECs Battle Over Need for UNEs

SBC argued that mass-market switching, DS3 and above loops, and transport should be removed entirely from the list of UNEs that Bells are required to share with competitors at lower-priced TELRIC rates. “The lesson from the marketplace, in short, is that it is time for the Commission to meaningfully limit unbundling in a manner that will permit real, facilities-based competition to bloom and fulfill the promise of the 1996 Act,” SBC said. The Commission “doesn’t have a choice in the matter,” SBC said, adding: “The lesson reflected in marketplace realities is corroborated by the substantial and consistent guidance the Commission has now received from the Supreme Court and the D.C. Circuit on the proper application of the 1996 Act’s impairment standard. The Supreme Court made clear in Iowa Utilities Board that the ‘impair’ language of [the Act] establishes real limits on unbundling.” (The Telecom Act requires unbundling an element if CLEC entry into the market would be “impaired” without the element.)

BellSouth said the FCC should find CLECs: (1) Aren’t impaired without access to unbundled circuit switching or to high-capacity loops, transport and dark fiber “in any central office with 5,000 or more business lines.” (2) Aren’t “entitled to obtain entrance facilities on an unbundled basis.” Also, BellSouth recommended: “Because carriers that are using special access are not impaired without access to the same facilities on an unbundled basis, the Commission should prohibit carriers from converting special access to UNEs. The Commission also should not allow the unbundling of facilities used to provide wireless or interexchange services.” In general, the FCC should adopt “narrowly tailored” unbundling rules “to address those circumstances when competitive local exchange carriers are genuinely impaired,” BellSouth said, adding, “If anything has been learned from the past 8 years of litigation and regulatory uncertainty it is that the maximum unbundling approach to which the Commission has previously adhered is legally unsustainable.”

USTA said the FCC should follow 3 principles in enacting the wholesale UNE rules: The rules must: (1) Advance facilities-based competition; (2) be narrowly tailored to avoid harming competition; and (3) provide certainty and be effective immediately. This is the 3rd time courts have invalidated the FCC’s UNE rules, and each court ruling has provided “clear guidance,” USTA said: “As a whole, these decisions require the FCC to take into account real competition in various markets and to compel unbundling only where competitors cannot compete without access to certain [ILEC] facilities.” USTA also said the FCC “must develop a meaningful impairment framework that addresses intermodal competition, specifically considering telephone service provided by cable, wireless, and [VoIP].” In light of that impairment analysis, USTA said: “The FCC must acknowledge that a competitive market for switching and high-capacity services exists. Real competition in the markets for these services exists without the use of [UNEs]… Today, competitive providers are using their own or alternative facilities to provide switching and high-capacity services and they are taking advantage of ILEC special access services to extend their reach for high-capacity facilities.”

Verizon argued that the industry has changed dramatically since the record was compiled in the Triennial Review Order (TRO) that was remanded by the court. As a result, the FCC must consider “all available means of providing service in competition with ILECs” when it does its impairment analysis. “All segments of the telecommunications industry are now subject to intense competition… without competing carriers relying on [UNEs],” the company said: “This is equally true of the mass market that was the subject of intense debate during the prior proceeding and of the high-capacity segment of the business that has been the focus of facilities-based entry since long before the [Telecom Act] was passed.” In high-capacity services, competing carriers are “using a combination of their own facilities, facilities obtained from alternative providers, or special access obtained from incumbent LECs.” In the mass market, “cable operators, [VoIP] providers and wireless companies are providing customers across the country voice services that compete directly with ILEC service and that are comparable in price, quality and functionality,” Verizon said in its filing.

Verizon also urged the FCC to make clear that: “Incumbents have no obligation to provide access to a network element as a UNE at TELRIC rates. Any state commission decision purporting to establish such an obligation is inconsistent with -- and therefore preempted -- by federal law.” Verizon said the Commission also should make clear that it has jurisdiction over Sec. 271 of the Act and any network elements that must be unbundled under that section. That means the agency also should “make clear that state commissions have no authority to regulate these 271 elements,” Verizon said.

MCI said the agency is required to pick up where the states left off and undertake a “granular, market-by- market analysis of impairment,” building on the data already collected by the states. MCI said the court vacated the previous UNE rules mainly because the FCC delegated this task to the states: “When the Commission conducts that granular review, the evidence will show that the Commission’s vacated conclusions that competitors are impaired without access to unbundled local switching and high-capacity facilities below specified capacity thresholds in every market are solidly grounded in the relevant market-specific empirical evidence. The Commission should therefore reinstate its impairment findings with respect to these mass market switching and high-capacity facilities.” MCI said the ILECs “will treat the court’s remand… as a directive for the commission to throw in the towel… But the D.C. Circuit required that unbundling judgments be based on a thorough granular examination of the evidence. The blanket non-impairment findings that the ILECs seek simply cannot be justified in the face of the economic and operational barriers to entry that continue to impair facilities-based competition in virtually every market in the country.”

The PACE Coalition, made up of CLECs that use UNE-P, said the D.C. Circuit’s decision “does not preclude the Commission from requiring ILECs to provide unbundled local switching to CLECs seeking to provide POTS [plain old telephone service] services to residential and small business customers.” PACE, joined by Broadview Networks, Grande Communications and Talk America, said: “[T]he court faulted the Commission for delegating authority to the states to determine whether carriers were impaired without access to ILEC switches, and for not evaluating the propriety of certain alternatives to a broad national finding of impairment. The court, however, did not prohibit the Commission from concluding that CLECs providing POTS services are impaired without unbundled local switching.” (UNE-P is the combination of all ILEC elements, so eliminating local switching would eliminate the UNE-P option.)

Momentum Telecom, a Birmingham, Ala.-based CLEC, said without the availability of UNE-P, “there would exist for residential end users no alternative to the local telecommunications service provided by BellSouth in its 9 state territory.” Momentum said BellSouth continues to have a natural monopoly and “UNE-P is the only market entry strategy that has yielded demonstrable success in the residential market for local telecommunications services.” Momentum argued: “Despite Chairman Powell’s open and notorious hostility… the Commission’s findings regarding impairment in the mass market are just as true as they were in 2003 and the impairments faced by competitors serving the residential local telecommunications service market are even more extreme. A UNE-P based local entry strategy has proven successful because it addresses each of the most critical impairments that would otherwise frustrate entrants seeking to offer service to residential consumers.”

The Ad Hoc Telecommunications Mfg. Coalition pushed for repeal of the requirements that ILECs provide UNE-P along with enterprise high-capacity loops and transport as UNEs. The group is made up of large and small companies that make telecom equipment for a variety of customers such as end users, other manufacturers and providers. It said studies and economic data show repealing these UNE requirements would encourage both ILECs and CLECs to invest in infrastructure. The coalition also argued that a repeal would benefit the U.S. economy as a whole because “the health of telecom manufacturing has a far bigger impact on the health of the economy than its relative size would suggest.”

EarthLink meanwhile used the comment cycle as an opportunity to urge the Commission to reinstate line sharing as a UNE. The line sharing UNE was eliminated for new customers last weekend. “As a majority of Commissioners agree, the line sharing UNE is vital to competition in the broadband market,” EarthLink said. In the year since EarthLink petitioned for reconsideration of the line sharing phaseout, “the case for reinstatement of the line sharing UNE has grown even stronger,” the company said. For example, EarthLink said, the phaseout was based on factors that no longer exist: “The availability of UNE-P competitive LECs with whom data LECs could partner and share the whole loop costs; the ability to overcome the costs of the whole loop with revenues from video services; and, the availability of line splitting to permit UNE-P and data LECs to share the loop costs.” EarthLink said for a variety of reasons “none of these propositions hold true.”