FCC Ends Most ILEC Cost-Based Unbundling and Resale Obligations

October 29, 2020 | by Andrew Regitsky

FCC Ends Most ILEC Cost-Based Unbundling and Resale Obligations

On October 28, 2020, the FCC concluded Docket 19-308 by releasing a Report and Order (Order) that phases out cost-based ILEC unbundling requirements everywhere except in the most rural areas of the country.  The Order also ends cost-based resale requirements for rate-of-return ILECs.  According to the Commission, the Order is designed to:

Eliminate cost-based unbundling requirements, subject to reasonable transition periods, for: enterprise DS1 and DS3 loops in areas with sufficient evidence of competition; broadband-capable DS0 loops and subloops in the most densely populated areas; voice-grade narrowband loops nationwide; multiunit premises subloops and network interface devices nationwide; and operations support systems nationwide except for the purposes of managing other unbundled network elements, number portability, and interconnection. 

Preserve the unbundling requirements for DS0 loops in less densely populated areas and DS1 and DS3 loops in areas without sufficient evidence of competition. 

Eliminate unbundling requirements for dark fiber transport provisioned from wire centers within a half-mile of competitive fiber networks but provide an eight-year transition period for existing circuits so as to avoid stranding investment and last-mile deployment by competitive LECs that may harm consumers. 

Forbear from the Avoided-Cost Resale obligation where it continues to exist, subject to a three-year transition period.

The Commission defends these actions because,

In the nearly quarter-century since the passage of the 1996 Act, the telecommunications marketplace has transformed to a marketplace characterized by competition and technological innovation. Former monopolist incumbent local exchange carriers (LECs) are now one of many intermodal competitors, facing fierce competition from competitive LECs, cable providers, and wireless providers, among others. The Commission has repeatedly adjusted the incumbent LEC-specific obligations in the 1996 Act, including unbundling and resale requirements, to account for changed circumstances. With this Report and Order, the Commission would continue to modernize these requirements and would end unbundling and resale requirements where they stifle technology transitions and broadband deployment. The Report and Order would preserve unbundling requirements where they are still necessary to realize the 1996 Act’s goal of robust competition benefiting all Americans.  (Fact Sheet, FCC Docket 19-308).

Some important points. The Order does not mean that unbundled network elements (UNEs) or resale will no longer be available to CLECs on a wholesale basis.  It does mean that CLECs will almost surely have to pay more when negotiating contracts for these wholesale services with ILECs or utilizing ILEC tariffs.

The Order arises from an agreement between the associations representing ILECs and CLECs – USTelecom and INCOMPAS.  It will become effective 30 days after it appears in the Federal Register.

The Commission will use the Competitive Market Test (CMT) established in the Business Data Services (BDS) Order to determine the few counties where ILECs must continue to make cost based UNEs available.  The CMT decrees that a county is deemed competitive when 50 percent of the locations with demand for business data services in that county are within a half-mile of a competitive provider or 75 percent of the census blocks in that county have a cable competitor present.  The CMT will be performed every three years to ensure that each county is appropriately designated as competitive or non-competitive.

Based on the CMT, here are the specific new unbundling requirements and the transition to them in more detail:

UNE DS1 and DS3 Loops

The Commission finds that unbundled access to DS1 and DS3 loops in the Competitive Counties, where demand for business data services is most highly concentrated, is unwarranted because CLECs are no longer impaired without access to these UNEs, and thus, ILECs no longer need to provide unbundled access in these locations.

In non-competitive counties, unbundled DS1 and DS3 loops will remain available at cost-based rates. 

Two-Part Transition

CLECs can continue to order new unbundled DS1 loops for 24 months and have 42 months to remove existing UNE DS1 Loops.  

For existing DS3 Loops, there is a single transition period of 36 months with no additional period for placing new orders.  The transition period begins on the Order effective date.

DS0 Loops and Associated Copper Sub-Loops

The Commission finds that unbundled access to DS0 loops and their associated copper subloops in urbanized areas (areas of 50,000 or more people) is unwarranted because CLECs are no longer impaired without unbundled access to these UNEs.

Two-Part Transition

CLECs are permitted to order new DS0 loops for 24 months from the Order effective date.

There will be a 48-month grandfathering period for all existing CLEC customers.  During this timeframe all UNE DS0 Loops (including any new UNE DS0 Loops ordered during the first 24 months) must be transitioned to alternative arrangements.  This period will commence on the effective date of this order.

UNE Narrowband Voice-Grade Loop 

These loops no longer are required to be unbundled at cost-based rates.  They include UNE Analog Loops, 64 kbps voice-grade channels over last-mile fiber loops when an ILEC retires copper (UNE 64 kbps Voice-Grade Channel Over Fiber Loops), and the TDM capabilities of hybrid loops (UNE Hybrid Loops) (collectively, UNE Narrowband Voice-Grade Loops).

Transition

The Commission finds that a three-year transition eliminating cost-based UNE narrowband DS0 loops is appropriate. 

Multiunit Premises UNE Subloops and Network Interface Devices (NIDs)

The Commission finds that CLECs are no longer impaired without access to Multiunit Premises UNE Subloop and NID obligations nationwide and access to these stand-alone UNEs are not needed for CLECs to obtain their own customers.

Transition – The Commission adopts a three-year transition period for existing customers and no availability for new orders.

UNE Dark Fiber Transport 

The Commission finds that CLECs are not impaired without access to UNE Dark Fiber Transport at wire centers that are within a half mile of alternative fiber.

Transition

The Commission grandfathers existing UNE Dark Fiber Transport ordered by the Order effective date for eight years to avoid risking abandonment of services and stranding significant investments reliant on existing dark fiber.  This timeframe strikes the appropriate balance between the competing interests of the various stakeholders as well as enjoys support by the majority of those stakeholders as reflected in the record. 

Operating Support Systems (OSS)

The Commission finds that CLECs are not impaired without access to UNE OSS, except where carriers are continuing to manage UNEs and for purposes of local interconnection and local number portability.

Transition

Coincides with the individual UNE(s) being managed.  ILECs will offer commercial OSS coinciding with the end of each UNE.

Avoided Cost Resale

The Commission which removed avoided-cost resale obligations for price-cp ILECs in August 2019, extends this forbearance to rate-of-return ILECs.

Transition

The Commission orders a three-year transition for existing avoided-cost resale services.  There is no window to order new services.

Commercial resale services will remain available under section 251(b)(1) of the Act.

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