Verizon Asks FCC to Undo Unbundling

Verizon Communications Inc. (NYSE: VZ) late Wednesday asked the Federal Communications Commission (FCC) to excuse it from sharing its DS1 and DS3 loop and transport facilities with competing voice providers, especially cable companies.

Verizon wants relief from its "dominant carrier" responsibilities in six major metro areas. These include Boston, New York, Philadelphia, Virginia Beach, and Providence, R.I.

Verizon says it’s facing "facilities-based" competition from cable, wireless, "over-the-top VOIP," and wholesale voice providers. It also cites losses in its own land-line customer count, although specific loss numbers had been redacted from copies of the petitions received Thursday. (See FCC Helps Verizon's Enterprise Game.)

The carrier says its cable, wireless, and wholesale competitors are unfairly relying on these facilities to compete for enterprise customers -- at a disadvantage to Verizon. "Competitors in the New York MSA are competing extensively using special access obtained from Verizon," one of the six petitions reads.

The forbearance, if granted, would relieve Verizon of the pricing caps imposed on the "dominant carrier" in a given market when selling wholesale access to its exchange facilities. So Verizon could charge competitors much more for access to its DS1 and DS3 loops.

Verizon cites a 2005 FCC decision to relieve Qwest Communications International Inc. (NYSE: Q) of similar unbundling responsibilities in the Omaha, Neb., market. In the Omaha Forbearance Order, the Commission found that Cox Communications Inc. facilities were “capable of delivering both mass market and enterprise telecommunications services.”

The main thrust of Verizon's argument is that competition has increased dramatically since the dominant carrier rules were written.

Verizon says its cable competitors now offer competitive voice services to 65 percent to 80 percent of households in the Pittsburgh metro area, for example. At the high end of the scale is the Virginia Beach metro area, wherein Verizon claims cable voice service is available to 90 percent of households.

"Throughout this MSA, Verizon faces competition from a wide range of technologies and an even broader array of providers," one of the petitions states. "These competitive alternatives are available to mass-market and enterprise customers alike."

The FCC now has 12 months to hold a majority vote on the issue. If it does not, forbearance is granted automatically.

— Mark Sullivan, Reporter, Light Reading