Carriers Join on Local Network Proposal - 2

BellSouth, Time Warner Telecom compromise opposed by CLEC industry.

BellSouth Corp. and Time Warner Telecom Inc. went to the government last week with a joint proposal to resolve a long-standing industry dispute over access to the local telephone network. The compromise, if approved, would further differentiate the tele- communications services—and possibly the prices—offered to businesses and residential consumers.

The proposal responds to an ongoing and highly contentious debate over which parts of the local network the ILECs (Incumbent Local Exchange Carriers) must lease at regulated rates to CLECs (Competitive Local Exchange Carriers). Under the compromise, ILECs would no longer be required to lease switching services to rivals for business customers, and, in return, the ILECs would adopt and report performance measurements for special access services.

"There are already thousands of competitive switches out there," said Pete Martin, executive director for federal regulatory affairs at Atlanta-based BellSouth. "You can have a switch that covers a whole state." Martin said he will push for the same switch deregulation to apply to the residential market, but to date, Time Warner Telecom is prepared to compromise only on the business market.

The rationale for applying different standards for business and residential customers stems from the fact that CLECs have focused most of their marketing efforts on businesses, and residential customers generally have fewer choices among providers. Time Warner Telecom uses its own switches, but many CLECs continue to rely on leased switching services from the ILECs.

The proposals sponsors assert that it would encourage more carriers to deploy their own switches and that consumers would benefit from differentiated services, but the CLEC industry widely opposes any changes in the network element leasing regulations.

"They would be limiting other carriers access and consumers access to competitive services," Jonathan Lee, vice president of regulatory affairs at the Competitive Telecommunications Association, in Washington, said about the proposal. "None of their [unbundled network element] positions make any sense or would be good public policy."

Doing away with the switch-leasing rule would reduce competition and likely lead to higher telecom prices, Lee said. "Any one of the elements taken away would cause large numbers of CLECs to suffer and probably go out of business," he said. "Business users would have less choice, less innovation and ultimately lower-quality communications at higher prices."

AT&T Corp., which is a large customer of Time Warner Telecom and a competitor to BellSouth, declared the proposal would benefit only the sponsors at the expense of customers. "Today, two of the main suppliers of wholesale access services in the BellSouth region have partnered on a regulatory strategy to ensure that prices remain high for large business customers and to eliminate competitive choices for small to midsize business customers," said AT&T in a statement.

Time Warner Telecom discussed the same proposal with other Regional Bell Operating Companies—which include Verizon Communications Inc., SBC Communications and Qwest Communications Inc.—but no others were prepared to agree to it, according to Don Shepheard, vice president of federal regulatory affairs at Time Warner Telecom, in Littleton, Colo.

In addition to eliminating the switch-leasing requirement for the business market, the compromise proposal would eliminate the requirement to lease dedicated transport services (which are the lines connecting carriers central offices) if three or more competing carriers provide the service. CLECs widely oppose this proposal as well.

"Covad [Communications Co.] strongly opposes [the] theory that interoffice transport should be eliminated if a certain number of CLECs are co-located in a central office because the mere fact that they are co-located does not mean that they actually serve the interoffice routes that a CLEC might need," said Jason Ox-man, assistant general counsel at Covad, in Washington. "It is most likely that the co-located CLECs do not in fact serve the central-office-to-central-office routes that Covad purchases from the ILEC."