Administration calls for one-year freeze on UNE rates

A Bush administration official yesterday asked FCC Chairman Michael Powell to freeze the rates RBOCs charge CLECs to use unbundled network elements for 12 months before implementing any new wholesale rules the commission might write.

Michael Gallagher, the acting secretary of communications and information for the National Telecommunications and Information Association (NTIA), made the request in a letter to Powell that discussed the FCC’s plan to adopt interim UNE rules before issuing a permanent order.

"To ensure appropriate competitive access, the administration believes the interim rules should cover a full year, unless superceded by permanent rules, and include the maximum legally sustainable transition period without wholesale rate increases for those network elements subject to the vacatur of the D.C. Circuit Court," Gallagher wrote in the letter. "We support your stated goal of adopting permanent rules by the end of the year, provided that the permanent rules complete the period of rate certainty initiated in the interim rules."

Gallagher’s letter came two days after Verizon Communications agreed not to raise UNE rates until after the November elections and the other three RBOCs—BellSouth, SBC Communications and Qwest Communications—made similar commitments through the end of the year.

After many CLECs predicted RBOCs would try to hike wholesale rates immediately after an appeals-court ruling eliminating most FCC rules regarding UNEs became effective yesterday, such price certainty would seem appealing. However, some CLEC officials privately said the Gallagher letter is worded in a manner that left it unclear whether high-capacity loops and transport—key components for facilities-based competitors—would be included in the price freeze.

AT&T spokeswoman Claudia Jones seemed to indicate this dilemma for competitors. "Without further clarification, it would be difficult to assess how [implementing Gallagher’s suggestions] would impact the competitive industry and the customers they serve," Jones said without specifying what clarifications the carrier seeks.

While CLECs expressed reservations about Gallagher’s proposal, SBC and BellSouth expressed wholehearted opposition to the notion of a one-year freeze of UNE rates. Both RBOCs expressed concern that such a decision would undermine efforts to reach commercially negotiated agreements.

"Now that the old rules have been officially vacated by the court, both sides have considerable incentive to negotiate commercial agreements," Herschel Abbott, BellSouth’s vice president of governmental affairs, said in a prepared statement. "We believe that the imposition of a full-year rate freeze, as suggested in today's letter, would destroy much of that incentive and would be inconsistent with the Court of Appeals decision."

SBC spokesman Dave Pacholczyk echoed this sentiment.

"Any suggestion that the status quo should be maintained beyond the end of the year will only provide a disincentive for some to conduct serious negotiations," Pacholczyk said.