CLEC Officials Suggest USTelecom UNE/Resale Relief Bid Could Face FCC Resistance
LAS VEGAS -- CLEC executives at the Incompas Show mixed optimism and hope that the FCC won't grant a USTelecom bid for ILEC relief from wholesale duties to share networks with rivals. They told show attendees that competitor ability to lease access to discounted copper unbundled network elements (UNEs) of large incumbents encourages both sides to deploy fiber. Some cited the importance of maintaining "avoided-cost resale" requirements also targeted by a USTelecom forbearance petition.
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Sonic Telecom CEO-founder Dane Jasper said the Telecom Act's unbundling mandate creates "interlocking incentives" in the "race to deploy" fiber, including to support 5G. He said Tuesday that UNEs help CLECs compete on price and build customer bases as a bridge to fiber deployment, while incumbents deploying fiber are freed from unbundling mandates. When Sonic builds fiber to the premises in the San Francisco Bay area, cable and telco incumbents often respond with network upgrades, he said. USTelecom's petition would let ILECs "milk" their copper while "cutting the legs out" of CLECs deploying fiber, he said.
Incompas CEO Chip Pickering asked why the FCC would replace a Republican policy of "new wires, new rules" (begun under then-Chairman Michael Powell) with a policy of "old wires, new monopolies and higher prices." He wondered why a GOP-run commission would scrap UNE-based service and drive up rates in rural areas with many Republican voters.
Jasper voiced optimism the FCC will conclude UNE deregulation would undercut broadband deployment and competition. He lauded agency infrastructure efforts through its Broadband Deployment Advisory Committee and actions to ease pole attachments and remove barriers to 5G. In meetings with FCC officials, "I believe we see eye to eye" on deployment, he said.
IdeaTek Systems has laid 2,600 miles of fiber to bring broadband to parts of rural Kansas, sometimes incenting cable to deploy fiber, said Daniel Friesen, managing member, noting his company has also used UNEs with dark fiber transport. "Competition is what stokes investment," he said: Without competition, ILECs "have no incentive to provide better products." He said he's "hopeful and optimistic" the FCC will retain UNEs.
"I'm not as optimistic," said Mike Galvin, Granite Telecommunications general counsel, citing other FCC deregulation, including business data services, "notwithstanding the record." In addition to UNEs, Granite uses avoided-cost resale, which often provides discounts of "18-19 percent," to serve multilocation businesses and government entities such as the U.S. Postal Service, particularly in rural areas, he said. ILECs "tellingly" didn't submit economic data for why the resale mandate should be scrapped, just legal and general arguments that there's enough competition from cable and others, Galvin said. He vowed to continue to fight, including on Capitol Hill, and is "hopeful" the FCC won't grant the relief.
USTelecom stuck to its guns. “These rules were established 22 years ago to help upstart companies get a foothold in the market -- not for indefinite access to unbundled elements of existing networks at government-set rates," emailed a spokesperson Wednesday. "The assumption was that CLECs would eventually build new networks and stand on their own. Given the transformation of the marketplace and the healthy competition in the local telephone market that Congress wanted to see, it is clear why we’re asking the FCC to take a fresh look at these 1996-era mandates that apply exclusively to wireline carriers.” The agency didn't comment.
Forbearance would "artificially sunset" UNE and resold service and "slam the door shut" on CLEC competition outside of large central business districts, said John Hoehne, chief operating officer of Chicago's Access One. During a proposed transition until February 2021, he said, new UNEs wouldn't be mandated, and after that, incumbents would be able to raise wholesale prices. Negotiating with big telcos absent regulation "is not an awesome position to be in," he quipped. AT&T suggested Access One could convert the UNEs to BDS, he said, but some peers report 300 percent price hikes under BDS. Galvin believes CLECs could negotiate better solutions with ILECs if their petition isn't seen as a "slam dunk."
Asked about the possibility the FCC could follow the BDS model of preserving some UNEs in rural areas, Harris Wiltshire's Julie Veach, who represents Sonic, said such a framework is probably one approach under consideration. But she cited "overwhelming" opposition to the petition, including "astonishingly," from 9,000 individual consumers and business owners with unique comments (see 1809060031). Many cited Sonic's service (see 1809070029). Karen Reidy, Incompas vice president-regulatory, noted Small Business Administration concerns (see 1808030026).