FCC Proposes Eliminating Most Remaining ILEC Unbundling Requirements
November 7, 2019 | by Andrew Regitsky
Man, it is good to be an FCC-regulated large telecommunications company these days! Unlike previous Commissions, this one seems intent on regulating itself out of a job, constantly issuing orders to eliminate the last remaining vestiges of regulation. For example, look at the decades long requirement in the 1996 Telecom Act requiring price cap ILECs to unbundle piece parts of their networks and make them available to competitors at cost-based rates. Or the requirement that these same ILECs make available their entire platform of services through Total Service Resale (TSR) at prices reflecting the removal of avoided costs. These ILEC duties have opened local markets to countless CLECs and jump-started competition with resulting lower prices and more efficient and creative services in so many markets. This FCC believes those days are over and artificially created discounts for CLECs are no longer needed.
In August, in a Memorandum Opinion and Order (Order) in Docket 18-141, the Commission responded to a 2018 USTelecom Petition for Declaratory Ruling (Petition), by forbearing from enforcing sections 251(c)(3) and (4) of the Telecom Act requiring price cap ILECs to provide cost-based unbundled voice grade analog loops and TSR. ILECs were still required to provide unbundled broadband loops at cost-based rates because USTelecom withdrew that portion of its Petition.
That clearly was not enough for the Commission. It just released a draft Notice of Proposed Rulemaking (NPRM) in Docket 19-308 which has the potential to eliminate all unbundling except in the most rural parts of the country. The NPRM would also extend the forbearance from providing TSR to non-price cap ILECs, which are generally smaller and more rural than price cap ILECs.
The NPRM will be adopted at the Commission’s November meeting. It is called “Modernizing Unbundling and Resale Rules in an Era of Next-Generation Networks and Services,” and it proposes removing certain unbundling requirements, including those for:
DS1 and DS3 loops in counties and study areas deemed competitive in the Business Data Services (BDS) Order and the Rate-of-Return BDS Order, with an exemption for DS1 loops used to provide residential broadband service and telecommunications service in rural areas;
DS0 loops in urban census blocks;
Narrowband voice-grade loops; including UNE Analog Loops, 64 kbps voice-grade channels over last-mile fiber loops when an ILEC retires copper, and the TDM capabilities of hybrid loops;
Dark fiber transport in wire centers within a half-mile of alternative fiber;
Network Interface Devices (NIDs); and
Stand-alone Operating Support Systems (OSS).
The NPRM also proposes to remove avoided-cost resale requirements in non-price cap ILEC service areas.
The Commission explains its rationale for initiating this proceeding:
Over the last 23 years, the communications landscape has dramatically transformed, with both the voice and broadband marketplaces replete with competition from a multitude of providers using a variety of technologies and offering communications capabilities and services unforeseen in 1996. These substantial marketplace changes warrant reexamination of the Commission’s unbundling and resale rules to ensure how best to further the goals of the 1996 Act in a modern era. (Draft NPRM, at para. 2).
And foreshadowing the forgone conclusion of this proceeding, the Commission bemoans how difficult competition has made life for ILECs:
In the 23 years since Congress passed the 1996 Act, incumbent LECs have gone from monopolists with nearly 100% of the local telephone service market to providing only approximately 46% of all wireline voice subscriptions and 12% of all voice subscriptions across all technologies. In the voice marketplace, incumbent LECs face competition from facilities-based providers, including cable companies offering VoIP and fixed wireless providers, as well as from mobile wireless providers. Indeed, consumers and businesses are increasingly moving from incumbent LEC voice services to services provided by a multitude of other providers using various technologies. In the broadband marketplace, incumbent LECs are just one of many intermodal competitors, providing only about 20% of residential broadband subscriptions at or above 25/3 Mbps. (id., at 21).
The Commission does legitimately note how technology has changed over the decades:
At the same time, the technologies used to deliver communications services have dramatically transformed. While TDM technology via copper networks was the dominant means of providing voice and dial-up Internet access services in 1996,80 the TDM-to-IP transition has been accelerating over the last two-plus decades. Indeed, incumbent LECs have been retiring last-mile copper, which will eventually lead to the transition from legacy TDM-based services to modern, IP-based services. (Id., at 22).
To give CLECs a chance to modify their networks for the new environment, the agency proposes a three-year transition period for existing customers. It also seeks industry comments on whether it should include a six-month transition period for new UNE and TSR orders, and if so, for what specific unbundled network elements or for TSR. Comments will be due 30 days after the NPRM appears in the Federal Register.
It’s clear that once this NPRM becomes an Order, CLECs will have almost no way to enter local markets at cost-based rates. Yes, they will still be able to resell ILEC services and utilize parts of ILEC networks, but they will have to do so through negotiating contracts with ILECs. A very tough task. Let’s hope the Commission is right and new technologies will allow competition to thrive.