Posted: 01/2000

UNE-P Gains Ground
By Ken Branson

BellSouth Corp. (www.bellsouth.com),
in its effort to prevent competitive markets from being built in its territory,
has made some progress selling its UNE platform (UNE-P) concept. Besides Access
One Communications Inc. (www.accessone.org),
the company has two more customers it’s willing to identify, and claims to have
others it can’t identify.

The new customers are Network One Inc. (www.networkonecom.com)
and Access Integrated Networks Inc. (www.accesscom.com),
both of which have signed on in the past six months.

BellSouth’s UNE-P offering works this way: A carrier customer can promise to
put 70 percent, 80 percent or 90 percent of its circuits on BellSouth’s network
for three, five or seven years. In return, it gets much deeper discounts than
the standard resale model provides (about 40 percent, compared with 14 percent
to 25 percent with resale), access to BellSouth’s entire nine-state network, and
the services on that network. Under most resale contracts, some enhanced
services are unavailable and some are available for separate charges.

Ken Baritz, president and CEO of Access One, which has a UNE-P contract
requiring a commitment of 90 percent of its traffic over seven years, claims to
have pretty much invented the whole idea in concert with BellSouth, to have
pioneered it in practice, and to have no regrets at all. "We are
UNE-P, pal," he says.

Baritz’s company has 60,000 access lines, mainly in Florida. His company,
which used to be called The Other Phone Company, has put UNE-P at the heart of
its strategy. His target customers are small businesses with fewer than 20
lines, and UNE-P has worked fine for them, he says. His relationship with
BellSouth, regarding UNE-P anyway, is cordial.

"We were the first ones that implemented UNE-P, so I’m not gonna tell
you that the program hasn’t gone on without hiccups along the way," Baritz
says. "I think that BellSouth has worked with us up to this point. I’ll use
the term ‘partner.’"

There are plenty of CLEC executives who use words less complimentary to
describe BellSouth, of course, and who believe buying a UNE-P package from
BellSouth is too risky because it puts the buyer’s future in the hands of its
main competitor. Baritz is aware of this, and insists he is no dewy-eyed
optimist. Quoting Ronald Reagan’s line to Mikhail Gorbachev, "Trust–but
verify."

Like Access One, Access Integrated Networks started out as a pure resale
carrier three years ago. "We believed there had to be a way to get better
margins," says Tom Wright, president of Access Integrated Networks.
"The resale margins–you couldn’t make a business out of that."

Wright’s company, based in Macon, Ga., has about 4,000 access lines in
Alabama, Florida, Georgia, Kentucky and South Carolina. He has chosen the 90
percent, seven-year UNE-P plan from BellSouth. He’s happy with the margins, and
generally happy with BellSouth, but he has a few issues.

"Some have to do with the products and packaging that’s available with
UNE-P," Wright says. "Customers may have services that currently
include a form of memory or voice mail, and it may be packaged with extended
area service. Every state’s tariffs are different, and sometimes that presents a
problem."

OSS

BellSouth provides a homegrown interface to its provisioning system called
Robo-TAG–TAG being the provisioning system. Access Integrated Networks is in
the middle of trialing the Robo-TAG, and has high hopes that many of its
provisioning difficulties will be smoothed out when it deploys Robo-TAG.

Mantiss Information Corp. (www.mantiss.com)
also makes an interface, called CLECware, which, at press time, was being tested
by Access One. At the moment, Baritz says, Access One does its electronic data
interchange the old-fashioned way: it takes the customer’s information,
transfers it to a contractor who re-formats it to BellSouth’s specifications and
sends it to BellSouth, and hopes that nothing, not so much as a comma or a dash,
is amiss. If anything is, BellSouth sends it back to the contractor, who sends
it back to Access One with a request to fix what’s wrong. Access One then goes
through the process again, correcting the error but risking making new errors,
and starts the process again. If all goes well, a customer might be provisioned
in two or three days. If gremlins intervene, it may take longer.

Mantiss’ CEO and co-founder Rachit Dhingra points out that this sort of thing
happens with resale, not just with UNE-P, and that CLECware, like Robo-TAG, is
intended to eliminate the problem by allowing direct, automated exchange between
the reseller and the LEC. Errors will show immediately, and can be corrected
immediately, for example. CLECware works, he says, would work with companies
doing UNE-P as an alternative to entering resale, but being a reseller already
makes it easier.

"Our take is that, if you already have resale up and running with an
ILEC, you’re 70 percent there," Dhingra says.

BellSouth spokespeople say there are some provisioning issues affecting
UNE-P, but they’re minimal.

"Based on my understanding, there are a couple of challenges, but
they’re certainly very do-able," says Ken Ray, BellSouth’s vice
president-interconnection services. "As I understand it … when you cut
over a customer from BellSouth retail–say a residential customer–and [the
customer] becomes a CLEC end user, the CLEC has to have an equivalent set of
products and offers for their end user. If there’s an area-calling plan, does
the CLEC offer it, or not? … We’ve converted thousands of accounts, and a very
small number fall out for manual crossing–under 10 percent of the
accounts."

Target Market

Ray says carriers buying BellSouth’s UNE-P package have to decide what they
want to sell and to whom. UNE-P, it turns out, is not always for everybody.

"If the end user is a low-volume, high-cost, rural customer who doesn’t
make many long distance calls, UNE-P may be more expensive [for the reseller]
than retail," says Jeff Ward, vice president-regulatory affairs at Bell
Atlantic Corp. (www.bellatlantic.com).
Bell Atlantic offers a UNE-P package in New York. "If, on the other hand,
you (the end user) live in Manhattan and call London all the time, it makes
sense."

Baritz agrees. "You have to cull your own accounts for customers that
qualify," he says. "Residential customers don’t qualify. People on
calling plans, or with complex services don’t qualify. Business customers
qualify."

UNE-P Goes North

Ward says Bell Atlantic has processed "tens of thousands of orders for
tens of thousands of lines" under UNE-P in New York, but declines to
identify his customers "for reasons of confidentiality." He says that
Bell Atlantic will file UNE-P tariffs in other states "where
appropriate" and will offer UNE-P "everywhere we are required to under
the FCC (www.fcc.gov) remand order." The
remand order is the FCC’s recent ruling that incumbent carriers must share their
loops with competitors. The details aren’t worked out yet, of course.

In the meantime, carriers such as Network One have to make a living, in Bell
Atlantic’s territory and BellSouth’s, and they must adapt to the regional
conditions.

Network One is switchless in the South and facilities-based in Bell Atlantic
territory, according to Tom Brinkman, senior vice president-operations.
Eventually, he says, Net-work One will have an ATM-based network to take over
the long distance part of its business.

"The UNE-P permits us to look, feel, act and price like a
facilities-based CLEC and not put one piece of hardware anywhere," Brinkman
says. "That’s the why of it. And what we can do is achieve margins that are
very close to, or in certain areas actually accede, what the facilities-based
carriers are being able to achieve."

Network One is reselling Bell Atlantic and BellSouth local service, but plans
to migrate all its business customers in BellSouth territory to UNE-P. In New
York, he says, the UNE-P offering is not enough. "You still need a digital
loop carrier in the central office," he says. "That permits you to
become a point of presence in the central office, and then you can lease
switching."

In the South, Brinkman says, it’s too good to miss. Network One has no plans
to build facilities there.

"Absolutely not," he says. "Think about it: I can get
everything I need, including the margins, without having to put any switching
gear anywhere. All the risks we have with deploying switches, we avoid."

Brinkman says his company has had next to no problems interfacing with
BellSouth. "They’ve done a great job of making their systems very, very
CLEC-friendly," he says.

Some observers see momentum building up for UNE-P. Certainly, Dhingra, who
thinks his company, Mantiss, is in a position to profit from such momentum,
believes there is a compelling argument for using UNE-P.

"The basic advantage for UNE-P is that you don’t have to locate a
switch, but buy a loop in a port on a monthly basis and get access to all the
features," he says. "We feel we’re in a good position to attack the
UNE-P [market] and are using the BellSouth/Access One deal as a ‘poster child.’
We’re talking to Bell Atlantic region customers."

So far, UNE-P has been the limited tool of small CLECs, but there has been at
least one sign recently that larger carriers may be interested in using it.
Sprint Corp. (www.sprint.com) recently began
offering local service in the city of New York and in other parts of New York
state. For at least the next year, it will resell Bell Atlantic service.
Eventually, company officials say, Sprint will migrate those resale customers to
Bell Atlantic’s UNE-P package.

Ken Branson is business and finance editor for PHONE+ magazine.