FCC ruling could mean status quo

The Federal Communications Commission's much-ballyhooed triennial review last month was supposed to kick-start the ailing telecom industry, but observers who've digested the controversial decision say the regulations won't have much immediate effect.

A year from now, they say, the industry will look largely as it does today. Some say the matter might remain legally entangled for years, in part because FCC staffers still are hashing out the fine print.

The FCC's move to deregulate the broadband market by phasing out line sharing and protecting the regional Bell operating companies' rights to any new network builds was sold by proponents as a way to spur RBOC investment in broadband technology. But the commission's decision to leave unbundled network element-platform (UNE-P) rules basically unchanged has not pleased the RBOCs.

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The Federal Communications Commission's much-ballyhooed triennial review last month was supposed to kick-start the ailing telecom industry, but observers who've digested the controversial decision say the regulations won't have much immediate effect.

A year from now, they say, the industry will look largely as it does today. Some say the matter might remain legally entangled for years, in part because FCC staffers still are hashing out the fine print.

The FCC's move to deregulate the broadband market by phasing out line sharing and protecting the regional Bell operating companies' rights to any new network builds was sold by proponents as a way to spur RBOC investment in broadband technology. But the commission's decision to leave unbundled network element-platform (UNE-P) rules basically unchanged has not pleased the RBOCs.

"I don't see this driving any spending by the Bells," says Jason Knowles, an analyst with Current Analysis.

Pat Hurley, an analyst with consultancy TeleChoice, concurs.

"Even though [the Bells] won some concessions on broadband they came out whining and complaining about the overall ruling," he says. "The only thing that's going to get the Bells to spend is if we see cable companies launch more voice-over-IP services that begin to take away customers from the RBOCs."

However, John Cordova, an analyst with research firm Infonetics, says the RBOCs could begin investing in more equipment, such as broadband-enabled digital loop carriers, ATM switches, routers and softswitches, as a result of the FCC decision.

"The RBOCs can now feel safe making some network upgrades," he says.

Even DSL provider Covad Communications, which perhaps stands to lose the most from the FCC's regulations, shouldn't see significant changes in the short term, say industry watchers.

Line sharing still will be around for three years, Hurley notes, and Covad already has multiyear line-sharing contracts. Line sharing doesn't affect business customers, who make up the majority of Covad's customer base, he says.

Covad used line sharing largely to help the company fill space on its national network.

Another reason the FCC decision might not have an immediate effect is that it will likely be challenged in court. Verizon CEO Ivan Seidenberg last week said his company would take legal action if the final FCC order gives states too much control in determining UNE-P policy.

The initial ruling indicated that individual state utilities commissions would determine UNE-P discounts, but did not spell out exactly how much latitude the states would be allowed.

If, as anticipated, the final FCC order next month gives competitive local exchange carriers (CLEC) such as WorldCom and AT&T continued widespread access to UNE-P, the RBOCs are likely to challenge the order in court. FCC Chairman Michael Powell, who had hoped to pass a ruling that would have phased out UNE-P more rapidly, also might turn to the courts.

UNE-P is a bundle of network elements that competitive carriers can lease from the RBOCs at low wholesale prices determined by state regulators.