AT&T leans on UNEs in local expansion

AT&T announced today it would expand the footprint in which it would provide local residential service via its One Rate bundle to 35 states. The company also said it is serving 1 million small business lines through its All in One plan.

The residential expansion comes as a direct result of the FCC’s final Triennial Review order issued a little more than two weeks ago. The order kept the unbundled network element platform in place pending the review of state utility commissions. AT&T relies heavily on UNE-P to provide the local service it includes in the All in One and One Rate bundles.

Though the final order was favorable to competitive carriers in this regard, a measure of uncertainty still exists for non-facilities based CLECs. State commissions could decide in many of the larger, more lucrative markets that no impairment exists due to the availability of non-incumbent switching. The FCC’s order tells state commissions they must declare a market non-impaired if at least three unaffiliated CLEC providers of mass-market switching exist or at least two wholesale providers.

Additionally, the FCC gave state commissions the authority to declare a market non-impaired if the triggers are not met, in instances where the requesting competitive carrier has the economic wherewithal to provide its own switching. The state commission would use strict FCC-defined criteria to make this judgment. This component of the order is a direct swipe at both AT&T and MCI, which systematically have chosen to use UNE switching when they can afford to provide their own, according to the Bell companies.

AT&T spokeswoman Claudia Jones said the company believes there is no local market that would meet the FCC’s triggers. Even if there were, she said there is more to the question of impairment than the ability to buy a switch.

“The states will have to look at economic and operational barriers. For instance, are the costs associated with using our own switch so burdensome that we wouldn’t be able to compete?” Jones said. “There’s no way to predict what will happen, but it’s our opinion that economic and operational barriers currently exist that would hinder our ability to provide facilities-based service in these markets.”

Another development that could derail AT&T’s plans is the legal challenge to the final order mounted by the U.S. Telecom Association and the Bells, which said the FCC ignored earlier instructions issued by the U.S. Court of Appeals for the District of Columbia Circuit to revamp its unbundling rules. The court said the FCC’s rules were too broad and did not adequately take into account local market conditions. They argue that the FCC in this order should have created a national policy governing UNEs and limited state commission influence.

Jones acknowledged the final order could eventually be overturned, but said AT&T wouldn’t worry about that for now. “We have a business to run and customers to serve,” she said. “Long-distance and local bundles are the key to the future and we have to act now.”

She noted the FCC’s final order not only instructs state commissions to identify economic and operational barriers, but also to remove them. “After all of the litigation plays out, we could be facilities-based anyway,” she said.

Also, AT&T is investing in new technologies, such as voice over IP, that soon could make the debate over UNEs moot, Jones said. “There will be other ways to move traffic. Two years from now, who knows what we’ll be talking about?”

Recently, Sprint said it would enter the competitive voice market via UNE-P as a direct result of the order, with plans to provide local voices services to 80% of the country. Sprint began testing local services with CLEC partners and integrating back office systems shortly after the FCC issued its initial order in February. Until now, Sprint’s participation in the local market was as an incumbent, while interexchange competitors AT&T and MCI have been providing CLEC voice services for more than two years.