FCC Relieves ILECs from Unbundling Requirement for FTTC Loops

The FCC also clarified that ILECs weren’t obligated to build time division multiplexing (TDM) capability into new packet-based networks or into existing packet-based networks that never had TDM capability. “We recognize that where ILECs deploy new packet-based networks they nevertheless may need to hand-off a signal to some customers in TDM format in order to be compatible with an end user’s customer premises equipment,” Comr. Martin said: “The decision makes clear that carriers that choose to deploy new packet-based networks will not be required to unbundle their new packet-based networks regardless of whether they hand off a signal in a TDM format to any such customer.”

Extending the FTTH rules to FTTC loops will promote ILEC investment in broadband, FCC Chmn. Powell said. He said FTTC and FTTH had “different technological and cost characteristics. Carriers are continually evaluating new equipment and transmission technologies that offer exceptionally fast connections. This dynamic may lead individual carriers to prefer different FTTH or FTTC technologies in different circumstances.” Powell said by adopting the order, the Commission wanted to “ensure that regulation does not skew that choice one way or another -- so long as consumers receive the fully panoply of next- generation services. Our Section 706 interests are satisfied when consumers experience speed of 20 Mbps or higher, speeds that are well in excess of today’s DSL or cable modem services.” Comr. Abernathy said she was “pleased” the Commission provided regulatory relief for both FTTH and FTTC: “I see no reason why our regulatory framework should favor one type of architecture over the other.”

Comr. Copps said the order was “yet another in a series of prescriptions this Commission is willing to write to end competitive access to last mile facilities.” He said the ruling restricted broadband competition for residential consumers and constituted “an ominous precedent for the small business community. Neither does it bode well for independent providers of VoIP services who don’t own or control the physical layer of the network.” Copps called the approach “dangerous,” saying putting the loop “beyond the reach of competitors can only entrench incumbents who already hold sway… The digital age is going to take a lot longer to get here because of the blows we are inflicting in competition.”

The Commission said its action was “consistent” with rules it adopted in the TRO that relieved ILECs of most obligations to lease advanced FTTH network facilities to competitors at a regulated, cost-based price. “These measures have proven a success in driving the deployment of next generation broadband,” Powell said. He said there was “an important limiting principle in this item: our rules demand that carriers deploy fiber deep into neighborhoods -- within 500 feet of a customer’s home. Our policy is designed to remove regulatory barriers to these risky investments; but we will remain watchful of requests that would back the Commission up from the broadband future.” Wireline Bureau Deputy Chief Michelle Carey said: “There is a green field rule and there is a brown field rule. In the green field situation, there are no unbundling obligations, but in the brown field” ILECs will continue to have 64 kbps unbundling obligations for voice services.

The unbundling relief puts the Bells “in a much stronger position in the race against cable to win broadband customers while leaving CLECs in limbo at least until the Commission considers final rules on unbundling at the end of the year,” said Jessica Zufolo, senior policy dir. at Medley Global Advisors. Carlisle told reporters after the meeting the order focused on relief for the mass market: “I think we need to take further steps to make sure those market distinctions [between mass market and enterprise market] are clear in our permanent unbundling rules… later this year.” An FCC spokesman said while both FTTH and FTTC rules were for the mass market, it was unclear whether “TDM versus packet-based rules [will] apply to the mass market only or to enterprise as well. The Commission will address that issue in its permanent rules.”

Bells called the decision a victory for consumers. SBC said it would “dramatically accelerate” its fiber deployment, providing advanced broadband services to 18 million homes in 2-3 years, rather than 5 years as previously announced. “The shovel is in the ground and we are ready to go,” said SBC Chmn. Edward Whitacre. He said the decision showed that “this Administration and the FCC understand that keeping outdated regulation off of tomorrow’s technology will boost jobs, investment and innovation. It will be equally important at the state and local level that the path remain clear if unnecessary regulatory or legislative hurdles.” SBC said under its “Project Lightspeed,” it would deploy 38,800 miles of fiber -- “double the amount used to build out the company’s DSL network -- at a cost of $4 billion to $6 billion.” The company said it would provide integrated IP-based TV, ultra high speed broadband, IP voice and bundles of wireless products and services.

“This FCC ruling is pro-investment and provides the regulatory certainty to move forward with additional FTTC deployment,” said BellSouth Vp-Govt. Affairs Herschel Abbott: “As a result, we plan to increase the number of homes we annually equip with an advanced fiber platform by 40% in 2005.” Abbott called the decision “a step in the right direction” and “good news for our customers.” He added, “Because of this ruling, we will have the flexibility to redirect our investment to provide the next generation of speeds and services to more customers, more quickly.” He urged the FCC to “take the additional step of making clear that there are no unbundling requirements under Section 271 for broadband elements.” USTA Pres. Walter McCormick called the ruling “a powerful indication that the Commission is serious about putting rules in place to encourage investment in broadband deployment, consumer choice and innovation.” He said he hoped the Commission would take “a similar approach in the other critical proceedings before the Commission.”

AT&T and ALTS strongly criticized the decision. ALTS Gen. Counsel Jason Oxman said “in a complete reversal of broadband policies announced just last year, the FCC has now immunized the Bell companies from competition for residential and small business customers over existing loops -- even though the FCC concluded that such remonopolization of loops plant would disincent further investment in new fiber deployment.” Oxman said the order undermined facilities-based competition and threatened the availability of competitive services to businesses: “Even access to core DS1 network elements -- supported by a unanimous FCC in the last competition proceeding -- is being curtailed in response to Bell company requests. The FCC needs to stop saying one thing and doing another. The nation’s small businesses need the Administration and the FCC to stand firmly in support of loop unbundling.”

AT&T Vp-Law & Dir.-Federal Govt. Affairs Len Cali said “the FCC majority seems unable to restrain its preference for monopoly over America’s consumers, business users and investment.” He said the ruling “appears to signal that [the Commission] might also allow the Bell companies to restrict competition in business markets. The lack of clarity in this order and the inevitable grab by the Bells to expand their monopoly does not bode well for telecom users, industry investment or the economy as a whole.”

The Consumer Federation of America (CFA) and Consumers Union strongly criticized the FCC decision, saying in a joint statement it would “curtail the ability of facilities-based competitors to access the fiber necessary to provide advanced services and result in higher prices and slower innovation.” “The FCC today took our country one giant step closer toward solidifying a 2- company domination -- the local cable and telephone providers -- over the consumers Internet market,” said Consumers Union Senior Policy Dir. Gene Kimmelman. CFA Research Dir. Mark Cooper said such a “stranglehold will stifle innovation as these duopolies discriminate against unaffiliated applications and services that in the past have driven the growth of the Internet and the boom in innovation technology. As a result, our country will fall even further behind Asia and Europe in broadband penetration.” The consumer groups blasted the FCC, saying it was “overwhelmingly clear” that “the policy of promoting high-cost broadband access dominated by cable and telephone companies” had failed.