New Look at Telecom Act

The FCC will look anew at RBOCs' obligations to lease portions of the local network to competitive carriers.

Over the next few months, policy-makers will re-examine rules that were put in place to spur competition following the Telecommunications Act of 1996. While the Federal Communications Commission considers whether the rules need to be altered, lawmakers will consider to what degree the ongoing struggles of the telecom industry—awash in bankruptcies, fraud allegations and rapid consolidation—are related to the landmark legislation passed seven years ago.

Later this month, the FCC plans to revise the obligations of incumbent telephone carriers to lease parts of the local network to rivals at regulated rates. FCC Chairman Michael Powell said late last month that the FCC will vote on an order re-examining which parts of the local network (known as unbundled network elements, or UNEs) that the RBOCs (Regional Bell Operating Companies) must lease to competitors.

Powell, who is known to favor deregulation, has been clear that he favors competition from providers that have built their own infrastructure over competition from new entrants that lease the RBOCs facilities. The Telecom Act provides for both types of competition, as well as resale, but the legislation directed the FCC to determine which parts of the network RBOCs must lease.

RBOCs argue that current rules, which they challenged in court and succeeded in having remanded to the FCC for further justification, force them to lease their services below cost. Relieved of that burden, they argue, they would be able to further upgrade their networks to provide advanced services to more users.

Speculation that Powell may relieve RBOCs of having to offer the full panoply of switching (which, combined with transport services and local loop access, is known as UNE-P, for UNE-platform) has raised alarm among CLECs (Competitive Local Exchange Carriers). Without the full set of network parts available to them, CLECs say, they will go out of business.

The FCC must also be mindful of the role of state regulators. "I think the states need to be the ones drawing the line," said James Bradford Ramsay, general counsel of the National Association of Regulatory Utility Commissioners, in Washington, in speaking about altering RBOCs network leasing obligations.

While few in Washington consider the Telecom Act a resounding success so far, many industry observers say its mission has begun to take hold. Although facilities-based competition may be the ultimate goal, it may be too soon to force new entrants to build that quickly, they say. "The question is whether or not you turn off the spigot [to new entrants] and how fast and whos going to do it," Kevin Kayes, Democratic staff director of the Senate Commerce Committee, said at a recent public forum in Washington. "We ought to make state or local entities make these decisions."

The FCCs vote on UNEs will likely have the greatest impact on voice service providers, sources say, because the commission is not expected to tinker with RBOCs obligation to provide the "local loop," which links all service providers, voice and data alike, to the customer.

"Our priority is the preservation of transmission facility unbundling, or loops, and we feel very confident that were going to keep the rules in place that we need," said Jason Oxman, assistant general counsel for Covad Communications Co., one of the few independent digital subscriber line providers to survive the industry shakeout. "We will preserve our access to unbundled last-mile facilities."

In the spring, the FCC is expected to reconsider the regulatory obligations of the RBOCs when they provide broadband services. Today, those services are treated like telecom services for the purposes of regulation, but RBOCs are fighting to have them treated like the less regulated "information services." Powell has not indicated to what degree he sympathizes with RBOCs position, but he does support ultimately treating like services in a like manner. "In the long term, there is a real interest in making sure we dont discriminate against any one platform," said Bryan Tramont, senior legal adviser to Powell, at a forum in Washington late last month.

The proceeding, which has ramifications for all communications regulation, has drawn opposition from many corners, including the Department of Defense, FBI and disabilities community. The regulatory duties of RBOCs should not be altered because the services provided are broadband, many argue.

"The [notice of proposed rule making] creates uncertainty about what the commission is up to," said Covads Oxman, in Washington. "Everyone was left to massively speculate about where it was going."

RBOCs contend that they are seeking "parity" with other broadband service providers, which are not subject to a range of regulations. While some telecom lawmakers have spoken in favor of regulatory parity recently, many say that such sweeping changes should be made by Congress.

"Just by virtue of proposing such a dramatic change in the regulatory scheme, it has turned the [Telecom] Act on top of its head," Kayes said. "Let Congress make those macro decisions, and I would hope the FCC would work in that framework to help interpret and advance those principles."