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Telcos Push to End the Great Unbundling

Mari Silbey
5/7/2018
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Once upon a time in 1996, Congress created requirements for telecommunications providers to unbundle certain network elements and sell access to competitors at a government-defined rate. In 2005, the FCC relaxed those rules, determining that a mandate on selling unbundled access in the last mile of telecom networks was unnecessary. Fast forward to 2018, and now the telecom industry wants the agency to erase unbundling requirements altogether.

In a filing with the FCC, United States Telecom Association (USTelecom) is petitioning for an end to rate-setting that has opened up incumbent telecom infrastructure to third-party service providers. According to the association, unbundling and resale mandates are no longer necessary to stimulate competition, and instead, they're now hurting consumers by stifling investment. USTelecom asserts that incumbent providers would spend more on new infrastructure builds if they weren't required to sell access to their networks at a discount price.

Unsurprisingly, non-incumbent providers beg to differ. Incompas , the association for competitive network operators and Internet companies, came out swinging with its response. In a statement, CEO Chip Pickering said, "Big telecom's 'competition cut off' will freeze broadband deployment and burn consumers and small businesses with higher bills. Cutting off access and kicking the little guy where it hurts is a brazen move, and we urge the FCC to reject the measure outright."

Dane Jasper, CEO of independent ISP Sonic, also weighed in on Twitter, calling the move by USTelecom "a huge attack by big telecom companies on competitive carriers like Sonic."

Despite the backlash, USTelecom may have picked the right time for its regulatory petition. Federal Communications Commission (FCC) Chairman Ajit Pai has made it his mission to slash telecom regulations, particularly those governing network pricing. The Open Internet Order of 2015 specified that the FCC should forbear from imposing rate regulation on Internet service providers when classifying them as Title II common carriers, but the fact that it left the door open to possible future rate setting is one reason Pai led the rollback of the regulation. (See Net Neutrality, Here We Go Again.)

Likewise, Pai has been adamant about not setting wholesale prices for business data services (BDS) -- those service-guaranteed connections for businesses, carrier backhaul and point-of-sale systems.

Former FCC Chairman Tom Wheeler tried to pass a BDS order that would have imposed new rate regulations in areas deemed uncompetitive, but he had to pull the ruling from the agency's voting agenda under pressure from opponents who pointed out that Wheeler's term was rapidly approaching its end. Pai moved the FCC in the opposite direction a few months later, passing an order that called for an end to BDS tariffs and other "legacy" pricing rules. (See Pai's FCC Makes Access Regs Flip-Flop.)


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As it turns out, even Wheeler was not a fan of the government mandating access at set prices to last-mile infrastructure by third-party providers. In an interview with Ars Technica in 2016, the former Chairman suggested that it is hard to sustain competition when a new ISP has to rely on a competitor for capacity.

However, under USTelecom's current proposition, the FCC would go much further. It could cut off all wholesale network access to competitive carriers, removing that leased asset as a potential launching point for new fiber builds.

The FCC has not yet responded in public to the USTelecom petition. The next FCC open meeting, where reporters may raise the issue, is scheduled for May 10.

— Mari Silbey, Senior Editor, Light Reading

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