CompTel to Bells: Shut up and compete

Competitive Telecommunications Association (CompTel) President Russell Frisby said in a press briefing today that the Bell companies’ current financial struggles are of their own making and have nothing to do with current regulations and policies concerning local telephone competition.

CompTel held the briefing to debunk the “myths” being spread by the Bells that claim FCC policies, which force them to lease their facilities to competitive carriers at prices below their provisioning costs, are unfairly draining their revenues and preventing them from developing innovative products and services.

“It’s time for the Bells to back up the claims that they’re making,” Frisby said. “They need to learn that there can be more than one winner. That’s how competition works.”

Frisby suggested that RBOCs spend more time innovating and less time lobbying if they want to maintain their dominant position in the marketplace. “It’s not the government’s responsibility to protect the Bell monopoly,” Frisby said. “The Bells’ profits are down because competition is working, because they made bad investments overseas, and because the economy is bad.”

He also suggested that the Bells stop complaining about having to make the unbundled network element platform available to competitors at TELRIC prices. Frisby pointed out that the Supreme Court affirmed the TELRIC formula earlier this year, and that state commissions largely have found Bell wholesale margins to be adequate. “Cost plus a reasonable profit is not below cost,” he said. “If prices are so low, then why aren’t the Bells going out of their regions via TELRIC?”

Last week, U.S. Telecom Association President Walter McCormick suggested that the FCC replace the TELRIC formula with a wholesale-driven model through which competitors leasing incumbent facilities would receive volume-based discounts. In contrast, TELRIC prescribes that UNE prices be set based on the forward-looking costs of maintaining a hypothetical “most efficient network.”

Frisby discounted the suggestion. “When Walter says ‘wholesale,’ he really means ‘resale,’ and retail prices are not sufficient and not reflective of the actual cost of the facilities,” Frisby said.

He added that the Bells are displeased with UNE-P not because it is unfair, but because it represents a threat. “The Bells are sore losers,” Frisby said.

Frisby also attacked the Bells for their oft-repeated complaint that competitors are content to lease facilities, rather than build their own – as Congress intended when it drafted the Telecom Act – because leasing costs are far lower than buildout costs. He said competitors have invested $55 billion in new facilities, including operational support systems and switches, since passage of the Act.

He added that the Bells’ assertions that state commissions “just don’t get it,” because they’re “trapped in old regulatory policy” is unfounded.

“Nothing could be further from the truth,” Frisby said. “They’re the ones closest to the consumers and they’re not tied up inside the Beltway. The Bells’ problem with the states is that they don’t support the Bells’ position.”

Frisby said UNE-P access remains critical for any competitor seeking to enter the local market. “Investors no longer are buying into the ‘if you build it, they will come’ philosophy,” he said. “So, companies are seeking entry through every means possible. And that’s what Congress wanted when it drafted the Telecom Act.”

A USTA spokeswoman responded by accusing CompTel of ignoring economic reality.

"We are all for fair competition, but the current situation brings neither fair nor real competition," she said in a prepared statement. "While CompTel claims the status quo is working, the economy and the telecom sector prove otherwise. Current regulations jeopardize healthy companies by forcing them to foot the bill for others. How is that good for the industry or consumers?"

The spokeswoman added that regulations imposed to foster local competition have had the opposite effect.

"They have discouraged both incumbents and competitors from investing in the networks and sending the telecom sector into a tailspin," she said. "Does CompTel really think that Congress and the FCC should just sit back and continue to allow the telecom industry to whither on the vine?"

Reporter’s Notebook

SBC Communications filed an application with the FCC today to provide interLATA service in California under Section 271 of the Telecom Act. SBC said competitors serve 3.7 million access lines in the state, a seven-fold increase since 1998. Currently, SBC provides in-region long-distance services in Oklahoma, Arkansas, Texas, Kansas and Missouri. Also today, BellSouth filed a two-state 271 application to provide long-distance service in Florida and Tennessee. The FCC earlier this week approved the carrier’s five-state application for Alabama, Kentucky, Mississippi, North Carolina and South Carolina. Previously, BellSouth was granted 271 approval for Georgia and Louisiana. The FCC has 90 days to consider the applications filed today.