Critics of USTelecom UNE Relief Bid Seen Facing Uphill Battle; Incompas Targets Harms
Opponents of USTelecom's FCC petition for ILEC wholesale pricing relief have a tough task, particularly in urban areas, more so after the group agreed with previous critic Windstream to propose a delay in eliminating "unbundled network element" discounts until 2021, some told us. Incompas, which represents CLECs using UNEs, said the forbearance petition would cripple the competitors and discourage fiber deployment, including of incumbent telcos. It said the agency should restart a procedural clock and extend comment deadlines. USTelecom said the clock doesn't need to be reset and stood by its analysis that UNE relief would provide consumer and economic benefits.
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USTelecom and members, including Windstream, proposed Feb. 4, 2021, for eliminating all UNE mandates, with no related price increases before then, in a filing posted Friday in docket 18-141 (see 1806220027). The support of Windstream, an ILEC/CLEC that also belongs to Incompas, helps a petition "that probably didn't need much help," given a 2017 FCC order largely deregulating business data services, emailed CCMI telecom consultant Andy Regitsky, with ILEC and CLEC clients. "CLECs have a very uphill battle." Frank Louthan, a Raymond James telecom analyst, expects the FCC to give ILECs relief, though he suggested it could preserve UNEs in some market segments with less competition, such as rural areas.
The revised proposal "seems intended to mitigate opposition and give a favorably oriented FCC political cover to grant the petition," emailed the Northwest Telecommunications Association, which primarily represents rural competitors requiring wholesale ILEC access to supplement fiber, where "there are no 'market-based' network alternatives." NTA said it's "encouraged" by USTelecom's proposed transition, but it was likely made in "reaction to the overwhelming industry, state regulatory, and consumer concerns its petition has raised."
Incompas said the proposal would "cut off the last remaining competition" to ILECs, at least from CLECs. "This would kill competitive investment in fiber networks and the use of UNEs for managed services and connections to the cloud -- all different forms of competition would be negatively impacted," said CEO Chip Pickering. He said service to government entities and small businesses would be most harmed. The deregulation would also undermine ILEC fiber incentives because they could charge "unlimited prices on existing copper networks" rather than investing in new networks, he said: "So the deployment agenda would be disrupted."
It's "very troubling" USTelecom asked the FCC "to promptly grant" the revised petition, Pickering said, suggesting ILECs "want to rush this through." He said the FCC has been adamant about being transparent and subjecting major proceedings to economic analysis, including on costs and benefits: "It would be unprecedented and conflict with Chairman [Ajit] Pai's process principles for this to be rushed through." He said the FCC should push back the deadline for deciding USTelecom's May 4 petition because of the revised proposal (it has a year, and can take another 90 days). He said Aug. 6 and Sept. 5 comment/reply deadlines should be further extended.
USTelecom doesn't believe the FCC has to restart the clock, said Diane Holland, vice president-law and policy. "We haven’t changed the basic ask. ... We came to an industry agreement that more time for this transition would be a reasonable thing to ask for. That’s not a new petition." USTelecom, which didn't oppose the previous comment extension, doesn't have a view on another extension, she said. The FCC didn't comment.
Holland said USTelecom stands by the market analysis it submitted in its petition, which cited Economics Inc. and CMA Strategy Consulting as projecting "substantial" benefits. "It would save consumers over $1 billion, and perhaps up to $5.9 billion, in reduced prices over the next decade," said the petition, which also cited expected job and economic output increases.
Louthan voiced skepticism about the CLEC market significance. "It's such a small part of the industry, it's not that relevant," he said. "The UNE model is a failed business model. The writing is on the wall. Look at the decline in the CLEC industry. It's massive. ... They're losing to the cable companies." If UNEs are scaled back, Louthan doubts ILECs would lose incentives to deploy fiber. "A second competitor is all you need to keep the incumbents honest," he said. "If they don't upgrade, the cable companies will come in and take market share."
CLECs "often offer a better product" and "get to places the cable guys don't," countered Doug Dawson, president of CCG Consulting, with CLEC and RLEC clients. He said CLECs use UNE transport connections to "tie together networks." He said some even serve residential customers by combining UNE loops with their own switches. "There have got to be hundreds of thousands of residential and small business customers at a minimum" served over UNEs, he said: The ILECs just "want to get the CLECs out of their offices."