Copyright 2003 Warren Publishing, Inc.

Communications Daily…01/28/2003

With FCC’s UNE proceeding heating up, Verizon and group of consumer organizations held back-to-back news briefings Mon., each explaining outcome they would like to see from Commission’s expected action in mid-Feb. Draft order in agency’s Triennial UNE Review began to circulate among commissioners late last week, occasioning heightened activity among interest groups. Commission has targeted its Feb. 13 agenda meeting for action on complex issue.

FCC reportedly is considering 2 key changes in UNE regime: (1) Phasing out switching for discounted UNE treatment, which would lessen competitive access to UNE platform (UNE-P). Platform is made up of all of ILEC’s network elements and switching is important part of that platform. (2) Exempting fiber lines from UNE sharing requirements.

Verizon Senior VP Thomas Tauke said 2nd change, treatment of broadband facilities such as fiber, was even more important to future of industry than UNE platform (UNE-P) issue. Verizon has urged agency to rule that, for “legal and policy reasons” ILECs don’t have to unbundle their broadband services, he said. From legal perspective, “there is no impairment,” meaning competitors wouldn’t be impaired if they couldn’t gain UNE-priced access to broadband facilities, he said. From policy perspective, “any requirement to unbundle for broadband will deter investment and the development of the high-speed Internet market,” he said. Tauke said Verizon would have FCC make “service-based” cut on unbundling, differentiating between broadband and voice services for regulatory purposes. Tauke’s service-based approach appears to diverge from other proposals to differentiate between copper and fiber or “old and new” facilities. Verizon officials said service-based approach better suited requirement that unbundling decisions be based on whether competitors would be “impaired” without access to individual elements.

On UNE-P debate, Tauke said switching should be removed from list of required UNEs because it had national market and was widely deployed and used by competitors. Many competitors have deployed their own switches, which eliminates any impairment concern, he said. With switching eliminated, there should be transition for elimination of UNE-P in residential market, with current UNE-P price gradually moving toward higher resale price, he said. That would lessen possibility of market disruption and encourage negotiated settlements, Tauke said. UNE-P concept could be replaced with platform-type product based on negotiated prices, he said.

Following that news briefing, NASUCA released report concluding that elimination of UNE-P entry strategy would greatly harm competition and “likely result in unregulated monopolies,” meaning Bells. Competition would be halted before it truly took root, harming consumers, Robert Tongren, NASUCA pres. and Ohio Consumers’ Counsel, said at news conference. Report, which was submitted to FCC, said in many markets competitive providers serving residential and small business consumers were using UNE-P. For example, in Tex. 77% of customers who switched to competitors were served by UNE-P-based providers, report said. Connie Hughes, N.J. Board of Public Utilities comr., said report offered “additional evidence that the states should maintain a strong role” in overseeing UNEs. She said she was “a proponent of facilities-based competition” but she wasn’t sure this was proper time to eliminate UNE-P option.

Also at news conference, Mark Cooper, Consumer Federation of America (CFA) research dir., said eliminating UNE-P option for competitors represented “a bad form of bait and switch” in which competitors were lured to enter market using UNEs and then forced to move to much more costly facilities-based model.

SBC spokesman said after event that “CFA should recognize that the real threat to consumers are the regulatory requirements, such as the UNE-P, that force telephone companies to provide service to competitors at below-cost rates.” Competitors don’t invest “a dime in the nation’s phone networks,” and yet “use the UNE-P to cherry- pick only the most profitable customers,” he said.