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Regulation

Good News for CLECs?

Competitive carriers (CLECs) got some positive news yesterday when the Federal Communications Commission (FCC) asked the U.S. Court of Appeals for the District of Columbia to reconsider its decision in the U.S. Telecom Association v. FCC case. The original decision was declared a victory for regional Bell operating companies (RBOCs) at the time. But that victory could now be reversed.

Back in May of this year, the D.C. Appeals Court struck down a rule that required RBOCs to share lines with competitors for high-speed Internet service (see RBOCs Ring Up Court Victory).

In that decision, it also ordered the FCC to reconsider its standards for which network elements must be shared with competitors. Specifically, the Court said that the way the FCC went about determining which elements RBOCs should open to rivals and which should not was unfair. The Court went as far as proposing some of its own standards by which it feels the agency should determine whether or not an element should be unbundled.

The court's main criticism of the FCC was that the Commission failed to consider competition from other providers such as cable operators when requiring local telephone companies to share a line. The judges also said the agency failed to identify local market conditions and associated wide-ranging costs when making elements of their networks available to rivals.

Although much of the rhetoric coming from the Commission has tended to favor the RBOCs in the past, the fact that the agency is appealing a decision that heavily favors RBOCs is a good sign for competitive carriers. And competitive carriers are in full support of the Commission’s appeal (see Covad Seeks Line Sharing Review)

While the line sharing issue is an important one, there is an even larger issue at stake in these proceedings -- the Commission’s ability to use its discretion in interpreting the 1996 Telecommunications Act. Some in the industry fear that this ruling could hinder the Commission’s ability to interpret not only the 1996 Act but all telecommunications statutes. This threatens to slow down reforms because the authority of FCC might be challenged in the courts on every ruling it puts out.

So what happens next? The Appeals Court has three options. It can reconsider the decision and issue a new one, rehear the case and render a new opinion, or deny the request and stand by its original ruling. If the request is denied, the FCC can then appeal to the U.S. Supreme Court. Based on other recent cases, it appears that the High Court rules more favorably for the FCC when it comes to discretionary issues (see Supremes Rule for Competitive Carriers).

While the case is being reviewed, the Appeals Court decision will not be implemented, and the current unbundling rules still apply. The FCC is already reviewing its current rules in its Triennial Review process.

— Marguerite Reardon, Senior Editor, Light Reading
http://www.lightreading.com
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Light-bulb 12/4/2012 | 10:07:49 PM
re: Good News for CLECs? I Sure hope that Covad identifies the amount of money used for "Lobbing" efforts. This is pure stupidity, they should have been busy buying equipment and access rights instead of riding the back of the RBOC. Of course, I support the RBOC efforts and agree that they should not be forced to "Give" away access to their NE's. Then again, I'm a capatilist not a Liberal.
I'm also under the belief that 1996 Telecom Act is what put the crimps on a great many things... I mean, if I was an RBOC who was forced to give access to my equipment so a "Competitor" who did not pay for the Capital of the equipment, and who was given special "Give-Away" pricing to access the equipment, then could offer a service that I wanted to offer for... Wow less than what I could offer it at (Since I had to pay for the ENTIRE equipment). Hell I wouldn't put anything in place either.
The Act of 96 is what put the brakes on if you ask me.

Cheerio,

wkdpssh 12/4/2012 | 10:07:38 PM
re: Good News for CLECs? You think you're a capitalist but unfortunately the RBOCs left on their own more closely follow a Soviet style economic system than anything that exists today in Russia. You're amazing talking about Covad's lobbying - tell me why SBC hired Bill Daley to be President - he's got absolutely no understanding of telecom except as to how it relates to regulatory policy and lobbying efforts. He should be fired because he was hired to get Tauzin-Dingell passed and couldn't do it - in fact he just makes things worse for them.

A strong position on facilities based competition is needed or else the RBOCs will just squander any operating cash they make on redundant telco systems (you don't want to anger one VP by allocating all the capital to another one's projects) and bureaucracy.

The RBOCs have had so many chances to win this battle hands down, and each time they get the ball they choke. And they're already doing it again.
Nuetrino 12/4/2012 | 10:07:36 PM
re: Good News for CLECs? What nonsense - the fact is the RBOCs have enjoyed a monopoly on local access long enough. Go back in time and you'll see that new entrants were blocked from installing local lines, so the RBOCs have had unfair advantage for some time. So if you really were a capitalist you'd know that competition is the force for innovation and efficiency, neither of which the RBOCs know anything about.

The tradegy is that the FCC unbundling ruling was a good thing for the industry and the economy as well, the problem is that the FCC did nothing to enforce it. Thus every CAP was stymied from servicing their customers.

The RBOCs have been sitting on a mountain of gold and are doing very little to mine it.

Without competition for BB local access, the RBOCs will do nothing!!!
rhynerapologist 12/4/2012 | 10:07:30 PM
re: Good News for CLECs? Anyone know of a business I can get into? I'm looking for something the government will help me build. I'd like no competition and no incentive to upgrade technology or give decent customer service. Once I'm established, I'd like to lobby to have my rules changed so that I can expand into new services. Sure, I'll agree to conditions to expand my business (wink, wink). Either that or I can ignore the conditions and just pay some fines. Besides, I know a couple of lawyers that can get my conditions lifted without my having to give up the new services.

So, anyone have any ideas for a budding capitalist?
BobbyMax 12/4/2012 | 10:07:30 PM
re: Good News for CLECs? Yhe Telecom misery was brought about by the Telecom Act of 1996 and a lot of corrupt whose management steals money through stock options and excessive salaries. The US government has prepped up these people without enforcing the laws of the land. Government institutions can function if institutions like SEC and FCC do politics and do not investigate. We are witnessing corruptions in government institutions for over 50 years.

CLECS wanted every thing for free from RBOCs. Funding by equipment vendors of CLECs led to the birth of so many spurious CLECs. They wanted to get rich at the expense of RBOCs. These guys came out of nowhere and they are akin to serial rapists.

CLECS wanted to unbundle every thing and colocate their equipment in the central offices of RBOCs. They wanted to share the billing system, and provisioning equipment, etc. In a typical large office, to support the twelephone system there are over 50 different system built at tremendous expense over a period of time.RBOCs do not have any expertise to unbundle these systems, Moreover, this very very huge expense. I mean billions of dollars. This indeed is unreasonable expectation on the part of CLECs, Deparment of Justice, FCC and PUCs.

There is a lot of corruption within RBOCs but there is no one to hear these complaints. For average citizens it is very difficult to comunicate with PUCs, SEC, FCC and Department of Justice.

The RBOC employees do know where the coruption is and how the public laws are violated. But the employees cannot report it because of employment-at-will concept. This barbaric and inhumane law and should be rescinded.

Talking about COVAD, the law suite against SBC was unreasonable. Covad got ransom money to the tune of $75 million ans some support money to the tune of $50 Million, if my serves me right. This pure and simple blackmail.
st0 12/4/2012 | 10:07:29 PM
re: Good News for CLECs? rhy said:
"So, anyone have any ideas for a budding capitalist?"
-------------
(1) large security business for the airport
(2) standard setting committees for telecom
(3) find a new field NOT yet covered by something such as Enron and WCOM
(4) some of gov. business

st
willywilson 12/4/2012 | 10:07:28 PM
re: Good News for CLECs? 1. CLECS wanted everything for free from RBOCs.

2. Funding by equipment vendors of CLECs led to the birth of so many spurious CLECs.

3. They wanted to get rich at the expense of RBOCs.

4. These guys came out of nowhere and they are akin to serial rapists.

5. CLECS wanted to unbundle every thing and colocate their equipment in the central offices of RBOCs. They wanted to share the billing system, and provisioning equipment, etc.

6. In a typical large office, to support the telephone system there are over 50 different system built at tremendous expense over a period of time. RBOCs do not have any expertise to unbundle these systems, Moreover, this very very huge expense. I mean billions of dollars. This indeed is unreasonable expectation on the part of CLECs, Deparment of Justice, FCC and PUCs.

7. There is a lot of corruption within RBOCs but there is no one to hear these complaints. For average citizens it is very difficult to comunicate with PUCs, SEC, FCC and Department of Justice.

The RBOC employees do know where the coruption is and how the public laws are violated. But the employees cannot report it because of employment-at-will concept. This barbaric and inhumane law and should be rescinded.

8. Talking about COVAD, the lawsuit against SBC was unreasonable. Covad got ransom money to the tune of $75 million ans some support money to the tune of $50 Million, if my serves me right. This pure and simple blackmail.

---------

1. False. The RBOCs are allowed to charge.

2. I agree.

3. That's called "competition." The problem was that most CLECs were stupid and crooked.

4. That's what all incumbents say about the competition.

5. Yes, and this happened to be the law.

6. The BOCs know how to do it when it suits their purposes.

7. Not only that, but DoJ was never interested in enforcing the law anyway. Still isn't.

8. Agree.
willywilson 12/4/2012 | 10:07:21 PM
re: Good News for CLECs? I'm also under the belief that 1996 Telecom Act is what put the crimps on a great many things... I mean, if I was an RBOC who was forced to give access to my equipment so a "Competitor" who did not pay for the Capital of the equipment, and who was given special "Give-Away" pricing to access the equipment, then could offer a service that I wanted to offer for... Wow less than what I could offer it at (Since I had to pay for the ENTIRE equipment). Hell I wouldn't put anything in place either.

---------

I disagree. The 1996 Act triggered massive funding of competitors. The unfortunate reality was that most of the competitors were incompetent and/or corrupt, and as such were sitting ducks for the incumbents.

Pricing of elements for CLECs has not been a problem for the RBOCs. They happily wholesale DS-1s for $100 a month and do quite well at it, thank you so much. They do fine on the other element charges, too.

The only thing the RBOCs didn't deploy was NGDLCs for the purpose of bringing high-speed access to residential customers. But neither did the RLECs, which had no competitive unbundling requirements.

Therefore, it wasn't the unbundling issue that prevented deployment of NGDLCs. Rather, it was the economics of residential high-speed Internet + the fact that the NGDLCs didn't work + the BOCs having bought into the ATM religion.

1. Economics: If you're a BOC, what would you rather do -- sell your customer a second phone line which is almost entirely pure profit, or spend $1,000 per line on DSL and lose money on each hookup? This is why even the rural LECs that had no competitive challenges have not deployed residential DSL on any kind of scale.

2. In most cases, NGDLCs were press releases not products.

3. If the BOCs hadn't been bitten by the ATM bug, they'd have installed Ethernet QAM from Nortel and Paradyne a long time ago. That stuff works like a charm for resi deployments, as opposed to the DMT/ATM stuff, which takes a lot of outside plant re-engineering.

The real game for the RBOCs is protecting their dominance of DS-1 to business customers. This is what the Broadband NPRM is all about. The RBOCs want to force any CLECs to become their wholesale customers for DS-1s rather than be able to lease pairs and connect their own electronics.

They have asked the FCC to approve a definition of "broadband" that would essentially cover all commercial services, giving them the ability to freeze out all competitors. In asking for this, the RBOCs are saying that they need to get their way so they can put NGDLCs in residential neighborhoods.

But that's a dodge, and it just might be that even the pro-RBOC FCC sees through it. Hard to say. In the meantime, I think the FCC wants to freeze the situation long enough so that the CLECs will face so much regulatory uncertainty that they just dry up and blow away. Until the FCC decides the broadband issue, no one with any brains will go close to a CLEC no matter how smart or honest it is.

Interestingly enough, it's the FCC that has defended its pro-RBOC movement on the grounds that it wants to clear up the regulatory uncertainty. Reality is 180 degrees opposite. This is how Big Business does its work behind the curtain.

rhynerapologist 12/4/2012 | 10:07:18 PM
re: Good News for CLECs? Great post, willywilson. The only part I disagree with is that RLECs have done a far better job of deploying broadband than the RBOCs, especially when you consider distance limitations in rural areas.

There are also a couple of areas in which Clecs are working. On is RLECs that are expanding their coverage. The other is Clecs focusing on small businesses in VZ and SBC country (non Ameritech SBC that is). And they both happen to be in areas in which UNE-P is the only option.

I've maintained for a while that the Clecs need to take a cue from the RBOCs and divert competition argument away from Enterprise customers. Only, instead of focusing on residential, like the RBOCs are doing, Clecs need to show the savings to small businesses. After all, 80% of businesses have <50 employees. And, like residential, the SMB makes for better "example" stories for Congressmen and women.
rjmcmahon 12/4/2012 | 10:07:17 PM
re: Good News for CLECs? Clecs need to show the savings to small businesses.
________________

Which expense item does a CLEC reduce for a small business? Voice? Is this a big enough bill, relative to all the other "taxes", such that a small businesses will give it priority?

In my opinion, small businesses may be able to grow by virtually expanding their inventories and deploying customer, do-it-yourself, recommender systems. Think of it like web commerce on steroids or modern computers meet the Sears catalog store ;-)

The problem seems to be they don't know how. Running a small business is a 24x7 affair which precludes spending too much time figuring out such problems. Also, such systems require last mile bandwidth to be priced more fairly.
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