FCC rulings could hurt CLECs, help large users

Regulatory rulings expected any day on a pair of furiously debated telecom issues might spell bad news for consumers and small business but wind up indirectly benefiting large companies.

A consensus is building among telecom experts that the Federal Communications Commission will move as soon as this week to phase out unbundled network element-platform (UNE-P) rules and slap restrictions on broadband line-sharing in an effort to encourage the regional Bell operating companies to invest in their networks.

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Regulatory rulings expected any day on a pair of furiously debated telecom issues might spell bad news for consumers and small business but wind up indirectly benefiting large companies.

A consensus is building among telecom experts that the Federal Communications Commission will move as soon as this week to phase out unbundled network element-platform (UNE-P) rules and slap restrictions on broadband line-sharing in an effort to encourage the regional Bell operating companies to invest in their networks.

While both decisions would be bitter setbacks for competitive local exchange carriers, they could be a boon for enterprise business users by forcing CLECs to focus more on such customers and spur the RBOCs to invest in fiber infrastructure, experts say. Providers that use low-cost UNE-P to serve the consumer and small-business market will be forced to redraw their business plans if UNE-P is phased out, this theory holds, and enterprise customers would be prominent in those new plans.

"Look at AT&T, for example," says John Malone, CEO of consulting firm The Eastern Management Group. "They have been making a big UNE-P push. With UNE-P gone, they may find themselves looking at how to do a better job of serving their enterprise customers."

Easing regulations on the RBOCs also could encourage them to deploy more advanced network services based on fiber, says Berge Ayvazian, a senior research fellow with The Yankee Group. More fiber in RBOC networks would benefit companies by making high-speed connections available to more office buildings, and to more remote workers.

Of course there is a flip side to doing away with regulations that help CLECs make money. In a less-friendly regulatory environment, fewer CLECs will survive, Ayvazian says. "Enterprise customers can expect to see fewer companies out there," he says.

UNE-P is bundles of UNEs that RBOCs must make available to competitive carriers at wholesale rates. UNEs include elements such as local loops, switching and transport between central offices. Every three years the FCC reviews its UNE policy in a process known as the Triennial Review.

UNE-P has become a bone of contention between CLECs, such as AT&T and WorldCom, and the RBOCs - Verizon, SBC, BellSouth and Qwest.

The CLECs say they need UNE-P to compete with the RBOCs in the local voice market.

The RBOCs say UNE-P is unfair because the RBOCs must sell them to the CLECs at steep discounts that don't take into account the true cost of network equipment for the RBOCs. The RBOCs also say that the low cost of UNE-P discourages competitors from investing in their own network equipment.

Media reports based on information from anonymous FCC insiders indicate that the FCC will recommend phasing out UNE-P when it delivers its preliminary report on the Triennial Review, which could be as early as this week.

While speculation runs rampant, users aren't sure that lightening the regulatory load on the RBOCs will benefit anyone.