We are at an interesting juncture in the evolution of the market; with nationwide competition now heating up between the Baby Bells and the long-distance carriers, the decision might have broader implications
The recent decision by the U.S. solicitor general not to appeal the lower court decision that gutted the FCC’s unbundling rules will mostly hurt competitive carriers serving consumers and small businesses.
But we are at an interesting juncture in the evolution of the market, with nationwide competition now heating up between the Baby Bells and the long-distance carriers, so the decision might have broader implications.
One thing is clear. Local exchange carriers such as Verizon and SBC will raise rates for so-called unbundled network elements, which they have been forced to make available to competitors. SBC, for example, while saying it is concerned about marketplace disruption, only committed to keeping rates the same “at least through the end of this year.”
That might force some weaker competitive local exchange carriers (CLEC) out of business.And it is causing the largest of them to squawk. For example, MCI, which has a huge local business, issued a release saying: “If the FCC’s rules are allowed to lapse and wholesale rates rise MCI may be forced to raise prices in some markets and pull out of others.”
(MCI says that, of the 19 million consumers that switched their phone service to competitive carriers, 3.5 million have picked MCI’s all-distance service, The Neighborhood.)
The operative words in MCI’s statement, however, are “may be forced.” It is unclear if the big CLECs – AT&T included – can afford to retreat from local markets, regardless of the fees, and if they will pass on higher fees or simply eat them. Much of the bantering is probably for political effect.
The politics of this whole effort are intriguing.
While it appears strange to have the solicitor general – a representative of the Bush administration’s Justice Department – going against the wishes of the FCC, which is headed by Bush appointee Chairman Michael Powell, just the opposite is true.
Last March, Powell was in the minority when the FCC voted in favor of keeping bundling, so technically this is a win for him. “He might have lost a battle, but it seems like he is going to win the war,” says David Rohde, a senior analyst with TechCaliber.
If nothing else the decision, coupled with the news last week that the Supreme Court refuses to extend UNE rules, indicates that the days of UNE are numbered. This will push adoption of VoIP and wireless as access alternatives, which can be viewed as a good thing for the industry as a whole.
