Granite Likely To End Much Service if `Regulatory Backstop' Scrapped in ILEC Bid

Granite said wholesale voice agreements with ILECs are the only viable way it can meet the demands of its multilocation business customers, which include 86 of the Fortune 100 companies. “Granite is able to negotiate viable wholesale voice agreements with [the Bells] because the Regulatory Backstop limits the extent to which the [Bells] can exercise their market power over wholesale business voice services,” the CLEC said. “If the Regulatory Backstop were eliminated, as USTelecom has argued it should be in the … forbearance proceeding, Granite would be forced to purchase almost all of the business exchange lines it requires from [the Bells] on a resale basis pursuant to Section 251(c)(4) of the Act. Such a business model would not be sustainable.”

Granite also cited an earlier estimate of $4.4 billion to $10.2 billion in consumer welfare losses if it and other CLECs are prevented from offering service over incumbent telco wholesale lines, given the absence of competitive alternatives. Granite said in its case, 85 percent of customer locations likely would have access only to ILEC wireline service because cable business offerings aren't available without new construction. Granite urged the FCC to deny the USTelecom forbearance requests.

USTelecom responded that Granite's "regulatory backstop” doesn't exist. Wholesale voice platform agreements "make sense in the market," rather than being a "legal or regulatory requirement," said USTelecom Senior Vice President Jon Banks. The association's request for forbearance "would have no effect on this nonexistent backstop and would have no effect on the reasons that companies have chosen to enter into wholesale voice platform agreements," he said.

Verizon this week disputed a previous Granite filing opposing the USTelecom forbearance requests for relief from “outdated” requirements to unbundle stand-alone voice-grade channels on fiber loops and the Section 271 obligation (see 1510270008). Granite “incorrectly” believes the 64 kbps unbundling rule and Section 271 combine to provide a “regulatory backstop for commercial UNE-P [platform] replacement products," a Verizon filing said Tuesday. “USTelecom’s forbearance petition has nothing to with UNE-P replacement products because neither Section 251 nor Section 271 requires ILECs to offer them. And forbearance from the 64 kbps unbundling rule and Section 271 will not affect the continued availability of these products. Granite’s latest filing only confuses the record, and the Commission should ignore it.”

Instead of a regulatory backstop, there is a commercial backstop for UNE-P, Verizon said. “As ILEC retail switched access lines in service continue to decline, commercial incentives to provide UNE-P replacements grow only stronger to keep as many access lines as possible -- retail or wholesale -- using the ILECs’ networks,” Verizon said. “Unlike the hypothetical costs Granite suggests it might face if the Commission does away with the 64 kbps requirement, the costs of unbundling a 64 kbps voice-grade channel over fiber are real and significant. And these costs threaten to impede ILECs from retiring copper and fully embracing superior fiber facilities. Granite, meanwhile, acknowledges it does not even buy standalone voice-grade unbundled loops from Verizon or any other ILEC.”

XO Communications responded to recent USTelecom filings that supported forbearance requests, including one filed on Oct. 30 (see 1511020068). “USTelecom has failed to demonstrate that its requests for forbearance from access to newly deployed entrance conduit (Category 6 of the Petition) and for pricing flexibility and use of contract tariffs (Category 7) meet the [forbearance] requirements of Section 10 of the Communications Act," an XO filing said Tuesday. "The Commission should reject these aspects of the Petition."