SBC proposal raises regulatory question

Just when you thought the telecom regulatory couldn’t get more confusing, SBC Communications yesterday raised the political and financial stakes on the FCC’s next attempt at trying to write unbundling rules.

SBC Chairman and CEO Ed Whitacre said his company would spend $6 billion on a fiber buildout that would deliver 15 to 25 Mb/s of voice, video and data via fiber to the premises (FTTP) in areas of new construction and fiber to the node (FTTN) in existing neighborhoods--if the regulations are right.

Now, the FTTP part should be pretty straightforward for regulators--that should not be subject to any sharing requirements, as dictated in the Triennial Review Order and upheld in court. Remember, that mandate was a realization of the “new wires, new rules” mantra of the RBOCs, which basically have said they wouldn’t invest in new infrastructure.

But the FTTN part is problematic. SBC says each node will serve about 300 to 500 homes with the last portion of the transport being done over copper wires--yes, the same old wires that are supposed to be subject to old rules and unbundling obligations. By using the existing infrastructure, FTTN makes the project financially viable.

Admittedly, with UNE rules being eliminated last week, SBC almost certainly will not have to share an FTTN network with competitors at regulated prices. However, will SBC have to share at all? After all, the difference between having to reach a commercial agreement vs. only reaching a commercial agreement if it’s clearly in the best interest of SBC is a significant.

Whitacre didn’t specify what kind of rules are needed in his speech, but last week he told me he needed the FCC to say he didn’t have to share before he would build fiber to the home. My bet is he feels the same way about FTTN, even if he’s using old copper lines for the last transport leg. And, let’s face it, while the copper wires are old, the capabilities are completely new. Does that make them new wires from a regulatory perspective? My feeling is Whitacre will argue it should.

Meanwhile, I’m not sure how FTTN sits in the regulatory framework, which is in flux already. More important, neither does FCC Commissioner Kathleen Abernathy, who begged off the question when asked after her keynote yesterday. After all, the FCC is still arguing over the treatment of fiber to the curb and fiber to multidwelling units; I’ve never heard the notion of FTTN broached.

One thing is certain: SBC is carrying a big stick politically. If Whitacre doesn’t get the rules he wants, he’s under no obligation to build. And I’m not sure any regulator or politician wants to get blamed for blocking a $6 billion infusion of capital into a recovering economy.

This is going to get interesting. Stay tuned.