Analyst: Draft UNE rules a mixed bag for CLECs, ILECs

With a decision possibly two weeks away, FCC commissioners are negotiating the details of a draft order for final rules regarding unbundled network elements (UNEs) that promises to focus on CLEC access to loops used primarily to serve small-business customers.

A March appeals court ruling effectively eliminated the UNE-P platform for CLECs such as AT&T, but facilities-based competitors have asked the FCC for regulated TELRIC pricing when they access DS-1 and DS-3 loops to serve business customers.

RBOCs have submitted filings that competitors are not impaired in most markets—and, therefore, should not be given unbundling prices for the loops—noting the existence of intermodal competition and their own special-access services as alternatives. Such a policy would encourage CLECs to build their own facilities instead of relying on incumbents’ networks, according to ILEC officials.

“The fact is that competitors have entered the market using special access,” Mike Glover, Verizon Communications’ deputy general counsel said during a press conference Monday. “Therefore, the FCC cannot find there is impairment.”

Many CLECs have claimed that intermodal competition is negligible in many markets and that special-access prices are much greater than UNEs.

Indeed, Tom Tauke, Verizon’s executive vice president of public affairs and communications acknowledged that DS-1 loops—with the ability to provide as many as 24 phone lines to a business—may need to be unbundled in markets where there are no alternatives. However, there are alternatives in most urban markets, which are the most lucrative for CLECs.

And that appears to be the direction of the draft order circulated among FCC commissioners last week, according to a report released yesterday by Jessica Zufolo, telecom analyst for Medley Global Advisors.

Impairment standards for DS-1 loops included in the draft order “forecloses most urban markets from unbundling requirements” but generally is expected to find impairment more often in areas where the population density is not as great, according to Zufolo’s report.

Criteria for impairment standards for DS-3 loops are stricter, so ILECs are less likely to have to unbundle them, the report states. Much-discussed topics regarding the mass-market definition and line sharing are not in the draft order, but Zufolo indicated the line-sharing item could be included during “11th-hour” bargaining—negotiations that could change the direction of the order.

“While the draft appears somewhat favorable to competitors, there is still a window of time for the order to tilt toward ILECs,” Zufolo wrote.

FCC Chairman Michael Powell has said he wants the commission to approve new UNE rules during its regular meeting on Dec. 15, but Zufolo said negotiations could delay a vote until Dec. 22. Tauke also indicated there is a possibility that the FCC will not meet Powell’s deadline.

“The important thing is that they get it right this time,” Tauke said, noting that the commission’s three previous attempts to establish UNE rules have been overturned in court.