Posted: 10/2003

Triggers Signal Stop to UNE-P Traffic

By Josh Long

The FCC has listed two triggers that
generally would require state regulators to eliminate a resale platform local
phone companies predominantly use to serve homes and small businesses.

In a nearly 600-page order released in August, the FCC said
states must eliminate switching as an unbundled network element (UNE) if they
find there are three or more facilities-based telephone companies serving the
mass market (i.e., consumers and small businesses) in a state-designated
geographic area with no affiliation to the regional Bell operating companies.

The consequence: local phone companies targeting consumers no
longer would be able to lease an entire phone line from the Bells at steeply
discounted rates. In other words, AT&T Corp. and other telcos assaulting the
bread-andbutter business of the four RBOCs no longer would have access to the
so-called UNE-platform.

There is a caveat in the order. Even if the so-called self-provisioning
trigger is met in a designated market, states can petition the FCC for
a waiver if they find exceptional circumstances impairing the ability of
competitors to provide consumers local phone service. The FCC cites the lack of
colocation space available in a telephone facility for competitors to install
their network equipment as an example of such a circumstance.

Under the FCCs rules, states also must eliminate switching
as a UNE if there are two or more wholesale carriers (with no affiliation to the
Bells) providing local phone companies with switching to route the traffic of
consumers and small businesses. Under this trigger, the FCC does not grant
states the option of seeking a waiver to preserve UNE switching.

Identified carriers providing wholesale service should be
actively providing voice service used to serve the mass market, and providing it
at a cost and quality and geographic scope that allows resellers to serve the
entire mass markets, the federal order states in paragraph 499.

The order subsequently states, While the record shows that
such wholesale alternatives are not generally available at this time we
establish this trigger as a mechanism for identifying markets with adequate
wholesale alternatives in the expectation such alternatives may well develop in
the future.

AT&T is not automatically guaranteed access to the resale
platform even if regulators find neither trigger is satisfied. If there are
neither three facilities-based competitors in a market nor two wholesale
switching providers, state regulators cannot automatically make a finding of
impairment; they are required to evaluate other criteria to determine whether
there is no impairment, according to the federal order.

Regulators must analyze possible economic and operational
barriers that would exist without access to the Bell switches at UNE rates and
whether companies are using their own switches to provide phone service to
enterprise customers or the mass market.

A primary operational barrier is the so-called hot-cut process
the procedure by which the Bell company migrates the phone line from its own
local switch to a rivals switch. Phone companies have groused the Bells are
not capable of migrating massive numbers of phone lines to competitors
switches in a short timeframe. The FCC has directed state regulators to
implement so-called batch cut processes to ensure the Bells can expeditiously
and smoothly cut over a bulk of lines at one time.

Among other things, economic barriers include sunk costs, such
as all the network gear a phone company needs to serve customers, and
first-mover advantages the incumbent operator enjoys by being the first phone
company in a market.

Regulators have less than a year to conduct an impairment
analysis. If they make a finding of no impairment in the mass market, UNE
switching UNE-P in other words goes away over a three-year transition
period. Under the FCCs rules, by five months following the effective date of
a regulators decision of no impairment, local phone companies are no longer
allowed to request access to UNE switching.

The federal rules also require the phone companies to migrate
all their existing customers off the platform if a state makes a finding of no
impairment. Thirteen months following such a decision, local phone
companies must submit orders for a third of their embedded customers to stop
leasing the Bell switch at the UNE rate and find an alternative. As possible
alternatives, competitive phone companies may either lease the Bell switch under
straight resale rules regulations that typically require AT&T, MCI and
others to pay Bell companies more money to access the switch than they do under
UNE-P or buy or lease a switch from other companies.

Twenty months following a finding of no impairment, each
competitive local phone company must submit orders to migrate half of the
remaining lines away from the platform. At month 27, they are required to submit
the remaining orders.

With the removal of the sunset periods outlined by the FCC
in February for phase out of UNE-P, individual state transitions from the
existing unbundling regime will be incremental, slow and patchy across the
nation, says Yankee Group analyst Dianne Northfield in a report.