What a legal web we weave: FCC may be sued over UNEs

The FCC probably will be sued again regarding its list of network elements that incumbent local exchange carriers must lease to rivals at below-market rates, industry and legal sources said.

"I can assure you that someone will sue," said an FCC staff member.

Industry insiders predict that ILECs will challenge last month's FCC order in court (Telephony, Sept. 20, page 8). The order, which stems from a 1996 lawsuit over interconnection rules, revised the list of unbundled network elements (UNEs).

Carriers and industry associations are awaiting details of a formal order, expected this month, before taking legal action. Although ILECs made some gains with the new UNE list - they don't have to lease data elements, for example - they face new obligations to unbundle subloops and dark fiber.

One potential legal tangle lies in switching. Under the FCC order, ILECs must continue to lease local circuit switches, except for switches that serve competitive LEC (CLEC) customers with four or more lines in the densest areas - downtown business districts - of the 50 biggest metropolitan markets.

An ILEC doesn't have to unbundle a switch in the top 50 markets if it provides an enhanced extended link. An enhanced extended link is a loop/transport combination that allows facilities-based CLECs to serve customers without having to co-locate in every central office (CO) of an ILEC's territory.

These usage restrictions, which require switches to be unbundled in most but not all cases, may conflict with the Telecom Act's requirement that ILECs provide "nondiscriminatory access" to UNEs for all carriers that request them, regulatory and legal experts said.

The usage restrictions on switching could be hard to administer, said FCC Commissioner Susan Ness. "A policy based on the number of telephone lines a customer orders could create consumer confusion and be an administrative nightmare."

The FCC last month did not say what happens, for example, when a business grows from four to five lines.

ILECs and FCC Commissioner Michael Powell supported another option: Take local switches off the UNE list altogether. New entrants already have deployed more than 700 switches nationwide, according to U S West. Because CLECs can obtain switches easily, they don't need a helping regulatory hand, U S West reasons.

The back-and-forth legal battles obscure the FCC order's true mission: to satisfy a U.S. Supreme Court remand. "We're supposed to come up with a standard for when an entity is impaired [without UNE access]," an FCC source said.

The Supreme Court ruled last January that the FCC improperly applied the "necessary and impair" test when it originally came up with a list of UNEs in 1996 (Telephony, Jan. 25, page 9). The court ordered the agency to create a new list after analyzing whether rival carriers could obtain each UNE from a non-ILEC source and, if not, would be hurt by that lack of access.

Some legal experts said the switching usage restrictions don't necessarily conflict with the Telecom Act. "As long as [conditions] apply to everyone, they're not viewed as being discriminatory," said Patrick Donovan, a former FCC official who is of counsel at the Washington law firm of Swidler, Berlin, Schereff, Friedman.

In this case, the FCC decided competition exists for local switches in dense urban areas serving big businesses. "There's no impairment in those markets," the FCC source said.

It's unclear if the FCC's new order will help push local service competition out from cities to residential and rural areas. Jonathan Askin, vice president of law at the Association of Local Telecommunications Services, believes it will.

The enhanced extended link is "a terrific incentive" to encourage rural deployment by facilities-based CLECs, he said. "It's not economical for a CLEC to co-locate in every central office," he said.

The order could make it easier for resellers to build up sufficient customer bases through UNE platforms so they can build their own networks in the long run, said Ray Hodges, a consultant with Technology Futures.