CLECs make last stand against ‘premature’ deregulation

Several members of the Association for Local Telecommunications Services (ALTS) said in a press briefing yesterday that decisions other than removal of switching from the list of unbundled network elements (UNEs) in tomorrow’s expected triennial review report and order over will be more important to facilities-based competitive carriers.

Specifically, ALTS members are concerned that CLEC access to transport and the local loop could be altered as a result of the order.

“We rely heavily on UNEs,” ALTS President John Windhausen said. “Even though we build or buy our own switches, we purchase loops and transport. Those are the most crucial elements to the deployment of facilities-based networks.”

As the FCC staggers to the conclusion of the review, Chairman Michael Powell and Commissioner Kevin Martin have yet to reach a compromise, according to published reports. Powell is trying to advance a policy shift that would eliminate CLEC access to UNE switching and transport on a national basis after a transitional period. Martin is said to also favor a weaning of competitors off the UNE platform and a shortening of the list, but would allow state utility commissions to make the determination using FCC-created guidelines.

Reportedly Martin has a deal in place with fellow commissioners Michael Copps and Jonathan Adelstein to approve his proposal at tomorrow’s commission meeting. In return, Copps and Adelstein agreed to support Martin’s preference that competitive carrier access to high-speed data lines be sharply curtailed or eliminated.

Windhausen said that ALTS and its members believe that telecom ultimately should be deregulated, just not as soon as incumbent carriers would like. “When we get to the point where alternative facilities truly are available in every market, then the incumbents can be released from their unbundling obligations,” Windhausen said. “But we don’t support premature deregulation.”

Mike Cassity, president and COO of NuVox Communications, said even if alternative facilities exist in a market, they might not be available to an incoming CLEC, which is all the more reason the commission must allow continued access to all of the network elements currently on the list. “Some CLECs are using all of their facilities and they’re not willing or able to build more,” Cassity said.

Windhausen added that state utility commissions should determine whether alternative facilities actually exist on a market-by-market, or preferably, route-by-route basis. “The states play an awfully important role in conducting that fact-finding,” he said.

Allegiance Telecom Chairman and CEO Royce Holland agreed with Windhausen that the FCC should continue its partnership with state commissions on local competition matters – “It has worked very well,” he said – and said that as long as incumbent carriers controlled “the last-mile bottleneck” competitive carriers would continue to need access to UNEs. “The loop is the ultimate bottleneck,” Holland said. “If the bottleneck is clogged, the rest of the bottle doesn’t matter.” Holland also said that unbundling obligations must be extended to new facilities, particularly fiber, because fiber is all that the Bell companies and other incumbents are installing in new residential and business park developments. Another reason is that, while intermodal parity exists to some degree in residential markets, it is something of a myth in the small business market, according to Holland “The ILECs are loath to admit that,” he said.

According to Cassity, access to incumbent fiber facilities is imperative because it is next to impossible to raise capital right now. “There’s no viable source for capital to build fiber routes, and that won’t change until things rebound,” he said. “It’s extremely naïve to think that restricting access to high-capacity lines will somehow stimulate investment.”

Holland added that the “new wires, new rules” approach that would cap competitive carriers at current transmission capacities – essentially 1.5 MB/s – for any new facilities they lease in the future, is a flawed concept, because many of the business customers currently being served by CLECs already are using applications that demand much more than 1.5 MB/s. He said this regulatory approach is being advanced by ILECs so that they can keep the 10 MB/s arena – in which carriers will provide integrated voice and data services over IP-based architectures – to themselves. Holland predicted that within two to three years carriers would be able to upgrade legacy digital loop carriers fairly easily by swapping DSL cards for 10 MB/s Ethernet cards.

Being limited to 1.5 MB/s while incumbents move to 10 MB/s “would be like using a calculator to compete against a state-of-the-art digital computer,” Holland said. “The FCC shouldn’t restrict the technology growth of CLECs while maintaining it for the ILECs.”