Optical/IP Networks

FCC: Back to the Drawing Board

Incumbent telecom providers have been busy declaring victory after yesterday’s decision by the U.S. Solicitor General’s office to drop a Supreme Court appeal of the March circuit court ruling that struck down some of the Federal Communications Commission (FCC)’s UNE-P line-sharing provisions (see Courts Overrule FCC Again ).

At the same time, consumer groups and competitive carriers, including most CLECs, are crying foul.

Today, FCC Chairman Michael Powell told several wire services that the Commission would not appeal the legal decision, and that it would focus on drawing up new rules for UNE-P line sharing.

But here's a big question: With packet technologies and Internet-voice services such as VOIP threatenting to take over the world, does it really matter?

Many experts see the FCC -- and the telecom lobbying groups -- as laboring over regulatory policy that affects legacy issues, while next-generation services such as VOIP threaten their very existence (see S&P Cautions Bells on VOIP). The bottom line is that yesterday’s court decision -- and the UNE-P issue -- may not be all that relevant.

”This UNE-P issue is never fixed because it’s probably unfixable,” says Bob Atkinson, Director of the Columbia Institute for Tele-Information (CITI), based at Columbia University. “The debate becomes an artifact of history, because the future is the battle of VOIP versus the legacy network."

Service providers, of course, do not see it that way. And neither do CLECs and consumer groups. As soon as the U.S. Solicitor General’s office, which is overseen by the Bush administration, issued its decision, the lobbying and PR groups linked to CLECs and ILECs cranked up their marketing machines, issuing their respective protests and victory calls.

For example:

”XO is disappointed that the interests of millions of consumers and small businesses would be put aside in favor of the interests of a few, large corporate monopolies,” said a statement from XO Communications Inc. (OTC: XOXO).

”The Solicitor General's decision is a major victory for consumers and the nation's economy,” said SBC Communications Inc. (NYSE: SBC). And so on. The reactions fell along predictable lines.

Dana Frix, a lawyer and co-chair of the telecommunications practice with Chadbourne & Parke LLC represents some CLEC clients. He says UNE-P has got to be enforced, and abolishing it is not a solution.

"If you get rid of UNE-P, AT&T and MCI cannot provide local service, so the effective goal of the 1996 Telecom Act, which everybody agreed was a good idea, will not be being met." He says the government has got to find a way to make UNE-P more enforcable and put to rest the complaints of the incumbents. "In 1996, a deal was struck and [the incumbents] said it was reasonable."

But as CITI's Atkinson points out, the importance of the UNE-P debate may be greatly exaggerated by both parties. The FCC, which has been squabbling over UNE-P for years, hasn't made progress toward clarifying or ameliorating the regulatory environment for the industry as a whole. And rules regarding UNE-P, which determines how incumbents share and are compensated for their local loop assets, are still largely in effect, regardless of the recent ruling.

Let’s take it from the top, and summarize the action on UNE-P and related issues facing the FCC through the past year:

  • The FCC last summer issued its divisive 576-page Triennial Review, a sprawling document filled with regulatory details that were designed to clarify its regulatory stance (see FCC Rumbles on the Rules and MCI, Qwest Strike Deal). It had the effect of splitting the FCC, angering many and pleasing few industry constituents, and leaving many pundits to predict it would do nothing more but supply lawyers and courts with plenty of business. So far, that appears to have been the result.

  • In early March, a federal circuit court struck down some provisions of the Triennial Review, the most notable of which was the goal of delegating responsibility for regulating UNE-P pricing to the states. This was viewed by the mainstream press -- and the stock market -- as a victory for ILECs. The CLECs and opponents of the court decision protested it and said that the Supreme Court would come to its rescue. After yesterday’s decision in the office of the Solicitor General, it’s now clear that’s not going to happen.

  • FCC Chairman Powell, who is actually in the minority camp on the commission, has been pushing a new agenda that largely ignores the issue of UNE-P rules promoted by his own commission –- and instead focuses on examining the regulation of VOIP and pushing ILECs and CLECs toward open-market negotiations to resolve their differences, such as the recent deal struck between Qwest and MCI (see VOIP Seeks Its FCC Level, FCC Suggestion Spurs (More) Conflict, and Qwest & CLECs Negotiate UNE-P).

  • The Bush Administration’s decision yesterday not to push for appeal backs the minority camp in the FCC, which includes Chairman Michael Powell and fellow Republican Kathleen Abernathy. The other camp includes Democrats Michael Copps and Jonathan Adelstein, as well as Republican Kevin Martin who went against the wishes of Chairman Powell on many UNE-P issues.

    The bottom line? With the industry’s myriad structural and technological shifts -- and the FCC's internal divisions -- the UNE-P debate may finally be starting to fade from prominence. Some analysts have noted that the rise of packet-switched technology such as VOIP has already made line sharing somewhat irrelevant (see VOIP to Star at FCC ).

    Atkinson predicts the FCC will now be forced to find a more practical solution to switching conflicts in the local loop. He sees them possibly looking at the process of "batch hot-cut," a technological solution to line-sharing conflicts through which ILECs and CLECs can come to terms with an automated, standardized process for switching over large groups of customers. The idea is that if this process were standardized and made more electronic, it would minimize the costs involved for both parties when customers switch providers.

    "The courts like batch hot-cut, and they would like the FCC to nail that down," says Atkinson. "Everybody agres they [CLECs and ILECs] must coexist. The ILECs now say they want the CLECs to access the network -- they just want to be paid a little more.

    Chadbourne & Parke's Frix says Congress may need to take up the matter and clarify their defense of UNE-P and the consumer's needs. "The RBOCs have the right to use the legal process to bully consumers," says Frix, "But perhaps Congress needs to rewrite the [1996] act to make it clear that there is Unbundled Element [UNE-P] and there’s a cost basis, and the RBOCs can’t stop you from using it.”

    — R. Scott Raynovich, US Editor, Light Reading

  • lastmile 12/5/2012 | 1:36:44 AM
    re: FCC: Back to the Drawing Board It had to come to an end !
    God Bless.
    Next-generation services such as VOIP/Cell threaten the very existence of circuit switching.
    No one has won the battle.
    The effective goal of the 1996 Telecom Act was to allow the government to control voice. Voice no longer needs just one medium of transmission.
    The UNE-P debate made sense 8 years ago. Today it means nothing.
    If my local bell raises my phone bill by another $20 I will use my cell more often.
    Finally it is an unbiased judge that gets us out of misery.
    materialgirl 12/5/2012 | 1:36:26 AM
    re: FCC: Back to the Drawing Board If you don't know where you are going, any road will take you there. The FCC has been trying to figure out what a line costs since the 1980's, and have been unable to. The fact is there IS no line cost, since so many costs are fixed. Pick any number and start to amortize. Quit trying and move on.

    What this mess shows is that the FCC is useless. They are spending our tax dollars pandering to a bunch of spoiled brats. They should have a GOAL, like "The world is changing. We will get on top of the curve for the good of our economy. Lets go for fiber to 90% of households by 2010", sort of like JFK's going to the moon. Then, get there.

    They have no understanding of the economics of IP (Which is like airline economics). It would be nice if they could get their arms around that, deal with its issues, and plan how to get us a working IP network anyway.
    coreghost 12/5/2012 | 1:36:22 AM
    re: FCC: Back to the Drawing Board
    The FCC is in a trap because the courts
    are dominiated now by anti-regulation fanatics
    who are using the courts for political purposes.

    Combined with a crooked Solicitor-general who
    avoids appeals that the government would probably
    win in higher courts and you have a perfect
    system for defeating any attempts at regulation
    by the FCC.

    All it takes these days is getting the case in
    the right court circuit and the cooperation of
    the solicitor-general. The combination can
    strike down any regulatory scheme. Powell gets
    the blame and people believe that "the courts"
    have decided that regulation is impossible.

    fgoldstein 12/5/2012 | 1:35:56 AM
    re: FCC: Back to the Drawing Board The press misunderstands the issues at hand, including, alas, LR. And it misunderstands VoIP.

    For a VoIP signal to get through, there has to be a physical link below the IP. It really doesn't magically travel through the "ether" absent any kind of Layer 1 medium! And that has become more difficult to get. The ILECs' view of the DC Circuit decision is that the ONLY unbundled element they really have to provide to CLECs anymore is a voice-grade analog loop. And it's allowable to break it so that it can't even carry modems at full speed. That's not the law, but the DC Circuit decision essentially flouts the law openly. It looks like something written by a Bell lawyer or lobbyist and passed under the table. It literally mocks earlier Supreme Court decisions on the topic.

    Internet service is not common carriage. The FCC will not prevent Verizon Online or SBC's ISP from blocking VoIP calls, at least via their competitors. They aren't doing it yet but just wait. Believe me, it's possible -- I've seen the box that can do it. (Layer 7 filtering.)

    The pending status, if Powell doesn't adopt new rules to prevent it, is that the raw pipes from the CLECs into the ILEC central offices -- the dedicated transport interoffice facility elements -- go away. So while they talk about transitioning from "UNE Platform" (resale of ILEC switch) to "UNE Loop" (CLEC switch on ILEC loop), that's not going to be practical without access into the CO! A handful of NFL City downtown COs have competitive providers going in, but other than that only AT&T has (legacy of the Bell System) access to most major COs, and nobody gets the 'burbs or the boonies. AND NOBODY BUT THE ILEC WILL BE ABLE TO PROVIDE DSL THERE EITHER.

    An awful lot rides on the coming election. I really don't care so much about UNE-P (which a CLEC-lawyer friend called "crack for CLECs") but the ILECs and Powell are doing a fine job of making any other kind of local voice or data competition, except by cable providers, impossible.
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