CLECs TO PURSUE VoIP AS NEXT STEP AFTER UNE-P

Competitors can bring “far more” to the VoIP marketplace than incumbents, Remi Communications Pres.-CEO David Malfara said: “What you'll see with the initial offerings of incumbents is pricing far above what you will see out of competitors operating in that arena… Out of greatest need comes a lot of innovation.” He said he expected to see a lot of VoIP technology deployed in rural areas, where he said there was a “need to aggregate customers’ requirements for the purpose of gaining sufficient revenue from [those] subscribers. [That] will be a competitive driver.” Malfara said it was important that the regulatory system allow CLECs to build their customer base in rural areas “to be able to achieve critical mass, so they can deploy VoIP.”

Frisby said with many members planning to enter VoIP market, it was critical that the universal service system be fixed. He said it was important “not to insert VoIP providers into the universal service system that’s broken.”

CLEC top executives agreed that while pursuing VoIP as a technology of the future, competitors still needed access to UNE-Ps. Malfara said with ILECs “building new facilities to be able to accommodate” VoIP technology, “it’s very important that competitors’ access to the last-mile connection be consistent for the application regardless of what’s used in terms of technology to provide transport service… As we begin to deploy next-generation technology with soft switching, we need to be able to keep up.” He stressed that not only the FCC but also state commissions in their analyses address that “significant” issue, adding that DS1 deployment was a solid “stepping-stone” for CLECs to migrate from UNE-P to the next-generation network.

Several executives expressed concern that getting into the VoIP market, where fundamental issues remained unresolved, involved a great risk. Paetec Communications Pres. Jack Baron said he was concerned that there was not as much “reliability in VoIP as in TDM [time division multiplexing], because you don’t have the legacy platforms and the line power.” Baron, whose company had started providing VoIP service, said: “I think you've got to see a little bit of further technology movement and some regulatory movement before you'll see IP really go wide.” Nii Communications Pres.-CEO Richard Burk, whose company expects to start VoIP deployment this year, said it wasn’t safe for small businesses to completely switch to VoIP and leave UNE- Ps behind: “Probably [VoIP] is not a viable business for my customers unless I am also a UNE-P provider.” He said VoIP technology and its cost-effectiveness were “getting there, but everybody needs to understand that we are at the very early stages of this and we still need access to the bottleneck facilities in order to do that… We've got to give… regulators an opportunity to figure out how it’s going to work.”

Baron said he didn’t see competition from cable companies in the VoIP market as a threat: “Very few competitors really understand” issues that telecom carriers had to face, such as emergency 911, CALEA, access for people with disabilities and others. “You really have to be a phone company first… to understand all that backup issues” to provide reliable service. Baron acknowledged there were a “number of VoIP competitors who are able to undercut us by about 40-50%,” but said it would be “another 5-6 years before you'll see serious competition in VoIP.”

Frisby once again stressed that it was “critical that rules of competition not change… The competition is working, our companies are becoming profitable, they bring billions of dollars in savings to consumers and [hire] hundreds of thousands of employees.” However, he said there was a “pattern and practice of Bells’ noncompliance” with the law, that he said was “well beyond simply not assisting competitors, but… actively avoiding competition, [driving] competitors out of the market.” Baron expressed concern that the completion of the Sec. 271 process by the FCC (CD Dec 4 p1) could prompt incumbents to “slip away from a regulatory oversight.” A USTA spokeswoman shot back: “This is just another attempt by the CLECs to divert attention from the realities of the fully competitive marketplace and the serious issues facing the industry.”