ILECS and Windstream Cut Deal to End Unbundled Network Elements

June 28, 2018 | by Andrew Regitsky

ILECS and Windstream Cut Deal to End Unbundled Network Elements

On May 10, 2018 we wrote about the Petition for Forbearance filed by USTelecom, the ILEC association, in which it argued that competition had changed so drastically since 1996, that after an 18-month transition period, the FCC should no longer require them to provide unbundled network elements (UNEs) and Total Service Resale (TSR) to their competitors at below market costs. Moreover, ILECs would be permitted to increase their UNE rates by 15 percent the day the Petition became effective. The link to that article is here.

A lot has changed since that blog was written. For one thing, the Commission began a proceeding – Docket 18-141 – to review the Petition. For another, after requests from UNE customers, the Commission extend the schedule for filing industry comments. Comments are now due on August 6, 2018. 

Clearly though, the most important development in this proceeding occurred this week when the largest UNE providers, including AT&T, Verizon, CenturyLink, and Frontier cut a deal with Windstream, a purchaser of UNEs and one of the most outspoken CLECs. The agreement would provide a longer transition period to eliminate UNEs and TSR – close to three years – and would keep current UNE prices in place until the transition period ended. Here's how the transition would work:

[The FCC would] set a date certain of February 4, 2021, for full [ILEC] relief from unbundled network element obligations, on which date all unbundled network element mandates and pricing requirements would cease to be in effect. 

No price increases on unbundled network elements could occur before February 4, 2021. 

No requests for new or additional unbundled network elements could be made after the effective date of any Commission Order granting unbundled network element forbearance relief. 

Unbundled network elements ordered prior to the effective date of the Order (“embedded base”) will be provided via current interconnection agreements or other arrangements and subject to this transition. After the effective date of the Order, new orders for service shall be addressed via commercial negotiations or tariffed services where available. 

Wholesale customers may keep in place any of their embedded base along with collocation arrangements necessary for access until February 4, 2021. 

By February 4, 2021, wholesale customers - at the wholesale customers’ option - must, without penalty, disconnect or transition their embedded base to alternative facilities or arrangements offering comparable functionality pursuant to rates available via commercial arrangements, price lists, or tariff services, where available. 

The transition is a default process, and carriers remain free to negotiate alternate arrangements superseding the transition. (USTelecom June 21, 2018 letter to FCC, Docket 18-141, at pp. 1-2.

The ILECs and Windstream explain that the new transition period would ensure that customer service is unaffected.

This proposal reflects the experience and planning of the purchasers and sellers of the great majority of unbundled network elements. It would provide certainty important to service providers and for network planning. Most importantly, this transition framework will ensure customers can transition to new services and new technologies on terms and at the cadence that makes sense for them. (Id., at p. 2)

This agreement between the ILECs and Windstream is remarkable for several reasons. First, the CLEC has been an aggressive thorn in the side of ILECs for the last several years. For it to agree on a major issue like UNEs means that Windstream realizes that it and other CLECs face an uphill battle winning on this issue with the current anti-regulatory FCC.

Second, it also means that by the time the transition period ends, in early 2021, we could have a new president, one possibly more inclined to favor ILEC regulation.

Third, despite Windstream's agreement on this, other LECs will still fight the Petition. They will argue that regardless of how mature local competition is, new entrants will always need UNEs and TSR if they are to become viable competitors to ILECs. Moreover, if the Commission supports local competition in rural areas, CLECs must have help to reach customers that economics do not support building out networks to. 

That is why that even while providing ILECs with forbearance relief by largely granting this Petition, we believe the Commission will create a rural exception where UNEs and TSR are still required. Time will tell.

We will be discussing the implications of this important Petition on the industry in a free one-hour Webinar on July 10, 2018 at 2:00 PM EDT. To sign up or for more information, please click here.