CLECs, FCC commissioners call for UNE negotiations

WASHINGTON – Competitors to the incumbent owners of large chunks of the U.S. telephone networks are proposing their own solutions for access to parts of those networks following a March court ruling overturning much of the Federal Communications Commission’s network-sharing rules.

On Friday, Z-Tel Technologies proposed that it pay a flat wholesale rate to the incumbents, often called the regional Bell operating companies. Under Z-Tel’s plan, called the “$20 solution,” competitive local exchange carriers, or CLECs, would pay a flat $20 per-line rate for all parts of the incumbents’ networks covered under the FCC’s Unbundled Network Element-Platform (UNE-P) rules, including the loop, switch port, switch features and all switch and transport usage.

In all but a small number of high-cost areas, where the $20 figure would have to be adjusted, Z-Tel’s proposal would pay the incumbents more than the $15 to $19 a month they are now receiving, according to Z-Tel.

“The $20 solution provides the Bells substantially more revenue per month than what they and Wall Street say they currently receive,” Don Davis Z-Tel’s senior vice president of corporate development said in a statement. “The $20 solution, if accepted, would preserve and enhance the tremendous benefit that consumers are receiving today from competitive service offerings.”

A representative of incumbent SBC Communications did not return a message seeking comment on calls for negotiations from Z-Tel and FCC commissioners. A spokeswoman for incumbent Verizon Communications said Verizon had just seen the Z-Tel proposal late Friday, but the company would welcome any “reasonable” negotiations. Verizon also issued a statement in response to a statement this week from all five FCC commissioners calling for an extended negotiation period.

“We have been trying to engage our competitors in good-faith discussions for some time and will continue to do so,” Thomas Tauke, Verizon senior vice president for public policy and external affairs, said in the statement. “However, extending the time for negotiations does not, in itself, accomplish the goal of reaching agreements. To be successful, all parties must recognize that negotiated agreements are more beneficial to our customers, our companies and our country than relying on government-managed competition through regulation.”

Z-Tel and other CLECs pay a discounted rate for pieces of the incumbents’ networks because the incumbents — Verizon, SBC, BellSouth and Qwest Communications International — inherited their networks after the breakup of the old AT&T in 1984. Because the Bell networks were built under a government-sanctioned monopoly, U.S. law has required the incumbents to share their networks with competing carriers, but the incumbents and other critics of the UNE-P rules argue that incumbents have little incentive to improve their networks or offer new services while they have to share their networks at discounted rates.

Z-Tel’s Friday proposal followed a flurry of activity this week in which telephone carriers and the FCC attempted to respond to the March 2 ruling by the U.S. Court of Appeals for the District of Columbia Circuit overturning much of the FCC’s rules governing the sharing of networks owned by the four incumbents. Later in March, FCC Chairman Michael Powell called on the incumbents and CLECs to negotiate UNE-P rates while the CLECs weaned themselves from using the incumbent’s networks within 18 months.

On Wednesday, the five FCC commissioners sent a letter to telecommunications carriers and trade associations, asking them to enter into negotiations over UNE-P rates. “Ongoing litigation has unsettled the market,” said a statement endorsed by all five commissioners. “To address this uncertainty, we ask all carriers to engage in a period of good faith negotiations to arrive at commercially acceptable arrangements for the availability of unbundled network elements. We trust the parties will utilize all means at their disposal, including the selection of a third-party mediator, to maximize the success of this effort.”

The FCC will ask the circuit court for a 45-day extension before its ruling goes into effect to provide time for negotiations, the FCC statement said. “In the past, the commission has been divided on these issues,” the commission statement said. “Today, we come together with one voice to send a clear and unequivocal signal that the best interests of America’s telephone consumers are served by a concerted effort to reach a negotiated arrangement. We call on all sides to commit to working in good faith toward a prompt negotiated resolution.”

In response to the FCC statement, MCI Chairman and CEO Michael Capellas sent a letter to the FCC Thursday, saying the company welcomed negotiations and calling for them to take place “in the open.”

MCI proposed that a panel with one FCC commissioner and two state regulatory commissioners oversee the negotiations. “As you may know, MCI has been eager to participate in productive negotiations on these issues for some time,” the Capellas letter said. “In the wake of the D.C. Circuit’s recent decision, MCI renewed its efforts, initiated discussions in a quiet and constructive fashion, and has been actively engaged in negotiations over the past several weeks. While the ongoing discussions have not resulted in agreement, we recognize that a negotiated, business-to-business solution to the disputes that have divided the industry would benefit incumbents, competitors and — most importantly — consumers.”

Capellas also called on the FCC to recognize that it will take time for CLECs to build their own network facilities. “Transition of millions of customers away from UNE-P to other service delivery mechanisms is not a simple matter,” Capellas wrote. “It cannot occur overnight, and will not succeed without the assistance of regulators. The industry must be given sufficient time to make the investments and put in place the methods and procedures that will make facilities-based competition on this scale a reality.”