Win-win for incumbents, CLECs?

Sometimes competitive local exchange carriers and incumbents both get their way, and that seemed to be the case in the wake of the recent federal court decision regarding central office co-location rules. By upholding some key aspects of the FCC's co-location order while also ruling that the order went too far in some of the authority it granted to co-locating CLECs, the U.S. Court of Appeals for the District of Columbia produced a win for both sides.

"The core of the rules and the whole notion of co-location remains intact," said an FCC spokesman.

In the decision, handed down earlier this month, the appeals court denied a petition by incumbent carrier GTE and other parties to review the April 1999 co-location order on all but three points. The court asked the FCC to revisit those points and explain them better.

The sticking points involve the type of equipment that can be co-located in COs, the authority CLECs have in determining where that equipment is placed and the right they have to interconnect to other CLECs' equipment.

Upheld were the CLECs' rights to "cageless" co-location and limits on what incumbents can charge the first co-locating carrier in a space. Cageless co-location would include space beyond the confines of the CO.

According to Section 251 of the Telecom Act of 1996, LECs must provide space for physical co-location of equipment "necessary for interconnection or access to unbundled network elements at the premises of the local exchange carrier."

In its subsequent order, the FCC interpreted the term "necessary" too broadly, saying that CLECs could co-locate equipment that performed any features in addition to interconnection, the court said. Also, by stipulating in the order that it saw no reason why LECs could refuse CLECs the ability to cross-connect their equipment, the FCC overstepped the bounds of the Telecom Act, the court said.

The GTE petition also challenged the FCC order's interpretation of the definition of "physical co-location" and "premises," claiming the FCC had no authority to require incumbents to make space available in "adjacent controlled environments" when physical space inside the CO was fully occupied. But the court said that incumbents were obliged to make such adjacent and cageless space available. At the same time, however, it said CLECs could not freely pick and choose preferred space on the incumbent's premises.

"The current open wording [of the FCC order] allows the CLECs to make demands about where they want to put their boxes and cages," said Nancy Kaplan, vice president of Renaissance Strategy. "The court is saying that that's unreasonable."

The ruling will have little practical effect, according to many data CLECs. "I don't think it changes the status quo at all," said Dhruv Khanna, executive vice president and general counsel of Covad Communications. Data CLECs aren't interested in co-locating equipment such as data collection, billing software or Web servers in COs, but they want to install second generation DSL access multiplexing (DSLAM) equipment that contains switching and routing functions.

"We're happy to go in there and come up with a reasonable approach to which equipment can be located in the central office," said Frank Paganelli, assistant general counsel for Rhythms NetConnections. "Routers and switching capabilities are important, but we can deploy our network either way."

But Kaplan sees a potential for conflict. "This [ruling] gives the [incumbents] the opportunity to throw up some barriers," she said.

While the FCC modifies the order's language to resolve ambiguities about the equipment CLECs can install, most CLECs are confident that incumbents will permit them to install multifunction equipment.

"The FCC said it will come down like a ton of bricks if [an incumbent] tries to prevent installation of second generation DSLAM equipment," said Michael Olsen, vice president and deputy general counsel of NorthPoint Communications.

The U.S. Appeals Court ruling said that the FCC's 1999 co-location order interpreted the Telecommunications Act of 1996 too broadly in:

- Allowing CLECs to co-locate all equipment, regardless of functionality, in the incumbent's CO

- Requiring incumbents to permit co-locating carriers to cross-connect their equipment within a CO

- Giving CLECs authority to determine where in a CO their equipment will be located

But the court ruling upheld the FCC's authority to:

- Require incumbents to make available "cageless" space and space in facilities adjacent to the CO

- Limit fees the incumbent can charge carriers for co-location