• United States

FCC may relax competition rules for local carriers

Jan 06, 20034 mins

The U.S. Federal Communications Commission is unlikely to recommend doing away entirely with current rules designed to create competition in the local phone service market when it reviews the rules over the next several weeks, a source close to the proceedings said Monday.

The rules, which govern what are referred to as unbundled network elements (UNE), force the regional Bell operating companies to rent elements of their networks to competitors at wholesale prices. The FCC is scheduled to complete a triennial review of those rules by late January or February.

Under the Telecommunications Act of 1996, the FCC is responsible for deciding what unbundled network elements the RBOCs must make available to competitors and helping to set the wholesale rates the RBOCs must charge for those elements.

In a report in Monday’s Wall Street Journal , unnamed sources within the FCC were quoted as saying that a proposal being drafted by staff under the direction of FCC Chairman Michael Powell would drastically alter the current rules. According to the report, the proposal would remove requirements that the RBOCs provide elements of their network to competitors at discounted rates, forcing the competitors to either pay higher rates to rent network access or build their own networks.

The changes would be phased in over two years, according to the report.

“There are a number of different options and proposals before the Commission, but it’s very premature to say what proposals the Commission will adopt,” FCC spokesman Michael Balmoris said.

However, a source within the agency said changes like those mentioned in the Wall Street Journal article would run afoul of a number of U.S. Supreme Court decisions upholding both the use of UNEs and the FCC’s rate-setting formula.

The Supreme Court is now considering a petition filed by long-distance carriers AT&T, WorldCom and Covad to overturn an earlier decision by the U.S. Court of Appeals for the District of Columbia that ordered the FCC to come up with UNE lists that were more favorable to the RBOCs.

While not commenting on the specifics of what changes are being proposed, the source said any changes to the existing rules system would have to be consistent with those rulings and be able to withstand judicial scrutiny.

A telecommunications industry analyst said Monday that, although the FCC probably will not throw out the system of UNEs, the regulatory tide is turning in favor of the RBOCs and away from the legally mandated sharing of network elements.

Frustration over the slow pace of broadband adoption in the U.S. and the dreary state of investment in telecommunications infrastructure since the collapse of the dot-com bubble may be pushing regulators and Congress to reconsider the guidelines set down by the 1996 Telecommunications Act, said J.P. Gownder, senior analyst at The Yankee Group.

“The way that the argument has been running is that RBOCs are not solidly behind DSL operations because if they invest in DSL, they have to share it and they lose money on (UNE),” Gownder said.

Doing away with the UNE rules might free the RBOCs to spend money building broadband DSL networks for their customers, he said.

“At least if the RBOCs start investing, consumers will have a choice of cable modems, DSL and satellite in most areas. Right now, consumers in most parts of the country don’t have a choice – they have either one or the other, so prices stay high,” Gownder said.

However, that model breaks down when it comes to business customers, which require advanced services that can only be provided by large carriers, he added. Unlike consumers, business customers would suffer greatly from a pull-out by competitors such as AT&T and WorldCom. Such a move could leave them with only one company in their area from which to receive their voice and data services.

For those customers, some form of UNE system may still be necessary. At the very least, a longer transition or “sunset” period to phase out the UNEs is in order, he said.

“I would think there would be a more gradual transition – a longer time period,” Gownder said.