• United States
by Jennifer Jones

Carriers keep on carping

Dec 22, 20035 mins

The FCC’s Triennial Review Order delivers a decisive blow to the beleaguered long-distance carriers, but they’re not giving up the fight.

Although the FCC’s August Triennial Review Order confirmed what many had expected all along – that the feds would not force incumbent local exchange carriers building broadband access infrastructures to roll out the welcome mat for competitors – the decision still dealt a decisive blow to the interexchange carriers and their competitive local exchange carrier allies. Adding to the sting was the FCC’s decision to let the ILECs out of requirements to keep their transport facilities open to competitors.

The IXCs, which don’t have the infrastructures to offer local broadband services, had held a glimmer of hope that the FCC would force the ILECs to share new broadband platforms just as the Bells had been required to unbundle voice networks under the Telecommunications Act of 1996. Now that those hopes have faded, some experts predict market consolidation, with ILECs eating up the weaker IXCs. The on-off talks between BellSouth and AT&T, which surfaced again in late October, seem to support this notion.

“For IXCs, the broadband revolution has a pretty big downside and no significant, visible upside,” says Thomas Nolle, president of consultancy CIMI.

But the IXCs aren’t going down without more sparring. Already the next phase of the telecom fight is unfolding in court, as the two sides haggle over widely perceived ambiguities in the Triennial Review Order.

“I don’t know if the FCC has cut the baby in half, but it has published a decision that was less than precise in some areas,” says Bill Wilde, CTO of eXchange @ 200 Paul, a carrier-neutral collocation facility in San Francisco.

For example, the FCC’s new unbundling requirements do not include dark fiber loops – meaning the ILECs must keep these open for use by competitive carriers. But the order includes an exception for cases in which state studies show ILEC competitors would not be impaired if they didn’t have access to these loops. If portions of a network in question lie outside an area of study, will the transport line be subject to unbundling?

Challenging the FCC decision will keep the IXCs in the ring for a while, says Nolle, who cautions that litigation might not be the wisest move for their long-term security. “Carriers are on a defensive mission, where they are using the courts and [any previous ground they gained through] unbundling, in effect, to perpetuate the status quo,” he says. Rather, they ought to be focusing their energies on turning into broadband content and application providers, Nolle says.

Free market proponents advocate letting all players duke it out on the streets. They point to activity in the enterprise sector as proof that government should take a hands-off position. Adam Thierer, director of telecommunications studies at Cato Institute, a public policy research organization in Washington, D.C., cites as evidence the plethora of facilities-based carriers offering services to businesses in urban markets.

The issue: The FCC decides that ILECs don’t have to give competitors access to new broadband infrastructures in a move some think signals sure demise for long-distance carriers. Doing battle are BellSouth, Qwest, SBC and Verizon against AT&T, MCI, Sprint and competitive local exchange carriers.
Outlook: Legal and regulatory battles will play out over the next several years, while carriers try to reassure investors that broadband rollouts will yield adequate returns.
Enterprise impact: Enterprise buyers could see modest price increases for OC-3 through OC-192 services, but overall both sides will work mightily to win corporate accounts.

Thierer insists that instead of prescribing unbundling guidelines and other regulations, the FCC should let ILEC-IXC competition along with pressure from cable companies nudge the carriers toward more broadband investment. “What’s wrong with cross-platform competition?” he asks.

Beneficial as a whole

Still others think the FCC order benefits the telecom market as a whole. “After the obligatory two weeks of ranting and raving that follows every FCC decision, we saw an uptake . . . in the number of requests for proposals,” says Perry Kamel, general manager of Siemens Next-Generation Carrier Networks. He notes that during last year’s “nuclear winter in telecom,” carriers neither invested in legacy networks nor made any progress toward building IP infrastructures. But now he sees a “reinvigorated emphasis” on access and optical products, particularly those that would enable higher-bandwidth “triple-play” voice, data and video services, and “a marked increase” in activities related to softswitch-enabled applications and services for converged networks.

With outstanding policy and legal decisions compounded by Wall Street’s need to rebuild its trust in the telecom sector, a complete thaw could take years. “About 2010, things will begin to come together,” Nolle says. “Regulation does not create opportunities, but it does create winners and losers.”

Jones is a freelance writer in Vienna, Va. She can be reached at .