States, RBOCs battle over regulations

State regulators are banding together in a last-ditch effort to influence a looming federal ruling about whether they can keep the tools they have for promoting local phone competition.

Eighty regulators from 34 states oppose restriction of their current authority to determine how much established local phone companies can charge for leasing network facilities to competitors. “Any restriction . . . will negatively impact the growth of local competition,” says a letter sent last week to the Federal Communication Commission from members of the National Association of Regulatory Utilities Commissioners (NARUC).

The state commissioners want to weigh in before the FCC decides if it will alter the terms under which the regional Bell operating companies must lease phone lines – and, in particular, phone switching – to their competitors. The U.S. Court of Appeals for the District of Columbia says the FCC must rule by Jan. 2. (See related column).

The RBOCs have long wanted to eliminate certain federal competition restrictions they say are breaking their backs. The FCC is reviewing the list of network parts that RBOCs must lease at cost to competitors, a list known as the unbundled network elements platform (UNE-P). The FCC could leave the list alone, delete items or do away with the list altogether.

While the UNE-P list is national, individual state utility boards have discretion as to how much of it to allow.

Unbundled elements let providers, such as AT&T and WorldCom, lease just the phone lines that connect to customer sites and install equipment that lets them deliver phone service over those lines. An alternative would be for competitors to lease the lines and all the other elements necessary to provide the service, and sell it at a higher price.

The UNE-P list includes phone switching, which lets competitors sell phone service without owning local switches, and RBOCs balk at that.

Verizon would like to see UNE-Ps disappear entirely, says Scott Randolph, director of federal regulations for Verizon. UNE-P elements sell at a 40% to 60% discount, double or triple the 20% discount for resellers.

RBOCs say they lose money on unbundled elements. SBC Communications has proposed an alternative that would replace UNE-P with a nationwide wholesale arrangement whereby competitors would buy an entire service and resell it to their customers. SBC uses the example of setting a $26 per month wholesale price for regular phone service that competitors then could increase.

The wholesale arrangement would stay in place for two years, after which competitors would have to support services with their own switches.

AT&T uses its local infrastructure and its own switches to provide service wherever it is economically feasible, says Reed Harrison, senior vice president of local network services for AT&T. “We use UNE-P to provide basic voice services to small business customers,” he says. AT&T will use its own switches as it penetrates local markets and it becomes economically feasible to do so.

Randolph says AT&T and WorldCom, the largest buyers of UNE-Ps, are not converting to using their own switches in conjunction with leased phone lines because UNE-P prices are so low.

State regulators oppose blanket national rule that might not be the best option in each state, says Bob Nelson, chairman of NARUC’s telecommunications committee. “It’s far too early to pull the rug out,” he says. “The right time [to drop UNE-P] may be earlier in New York than in Idaho.”

He says states have more resources and are closer to the local markets than the FCC, and so are in a better position to decide the fate of elements on the UNE-P list.