TIAking issue

TIA believes that a key to recovery for the depressed telecom sector is widespread broadband deployment; so the letter encourages the FCC to construct a regulatory framework that stimulates increased investment in broadband networks.

The Telecommunications Industry Association last week hand-delivered to the five members of the Federal Communications Commission a letter outlining the association’s concerns over the long-term damaging effects of reduced telecom equipment spending by network operators and the resulting plunge in research and development efforts by the communications equipment sector.

In the letter, addressed to FCC Chairman Michael Powell, TIA President Matthew J. Flanigan says steep declines in the R&D programs of TIA member companies is attributable to the dramatic reductions in operator capital expenditures since 2000.

Flanigan says service provider capital spending is the “lifeblood of companies’ R&D programs” and he cites some compelling evidence. Ciena cut its R&D spending by 26% between October 2001 and July 2002; Corning’s declined 24% between June 2001 and March 2002; Lucent pared its R&D by 36% from fiscal 2001 to fiscal 2002; Nortel’s was down 28% between September 2001 and June 2002; and Sonus cut its R&D expenditures by 46% during the same time period.

Of the 36 member companies TIA compiled R&D data on, 26 reduced their R&D expenditures between June 2001 and August 2002.

Sharply reduced capex and its resultant negative impact on equipment vendor R&D “seriously threaten the future of industry innovation, our global leadership in technology, and in some very important respects, the very security of the United States,” Flanigan states in the letter.

TIA believes that a key to recovery for the depressed telecom sector is widespread broadband deployment; so the letter encourages the FCC to construct a regulatory framework that stimulates increased investment in broadband networks.

Flanigan requests the FCC adopt TIA’s recommendations in the Triennial Review of the Unbundling Rules proceeding that unbundling not apply to new, last-mile broadband facilities, including fiber, DSL and successor electronics deployed on the customer side of the central office. The letter concludes that such a determination would encourage facilities-based competition and an influx of investment.

“It not only would signal the importance of broadband, but would help return the flow of capital into the sector, encourage service providers to invest once again in new equipment and allow industry to pour money back into R&D,” Flanigan concludes in his letter. “Our industry then would be better situated to widely build out the advanced networks that will support the growth of innovative products and services, thus growing the industry’s way to profitability once more.”

The FCC’s triennial review will take place early next year. It is not expected to drastically change policies regarding unbundled network elements-platform (UNE-P), which is intended to enable alternative carrier access to regional Bell operating companies local loop facilities and subscribers, but has been bitterly criticized by the RBOCs as detrimental to their business, thereby forcing a cutback on capital spending.

This is the second letter the FCC’s received in the past two weeks encouraging it to come down on one side or the other in the UNE-P triennial review. The other letter was from members of the National Association of Regulatory Utilities Commissioners (NARUC) opposing restriction of their current authority to determine how much established local phone companies can charge for leasing network facilities to competitors.

The NARUC letter represented the viewpoints of 80 regulators from 34 states. They claimed that any restriction on their authority to determine leased facility charges would “negatively impact the growth of local competition.”

The state commissioners want to weigh in before the FCC decides in its triennial review if it will alter the terms under which RBOCs must lease phone lines – and, in particular, phone switching – to their competitors.