Channel Partners

February 1, 2000

3 Min Read
FCC Order Gives ILECs an Edge over Resellers

Posted:  02/2000

FCC Order Gives ILECs an Edge over Resellers

In what resellers hail as a major victory for their industry, the FCC ( has ordered ILECs to make x digital subscriber
line (xDSL)-based advanced services available at wholesale rates for resale.

However, resellers say the order contains a loophole that may allow ILECs to continue
denying them access to these services. It’s a big enough concern that the issue may land
in court.

The FCC’s action aims to help promote the availability of broadband Internet access for
residential and small business users. The order says that ILEC advanced services sold at
retail to residential and business end users are subject to the Telecommunications Act of
1996’s discounted resale requirement, "without regard to their classification as
telephone exchange service or exchange access service."

This ensures that resellers can acquire advanced services at wholesale rates, the FCC

"Heretofore, with the sole exception of Bell Atlantic, incumbent LECs have
declined to apply statutory discounts to xDSL services, arguing that such services were
either exchange access or not offered at ‘retail,’ and hence not subject to the resale
requirements of the [act]," explains Charles C. Hunter, general counsel of the
Telecommunications Resellers Association (TRA) (

The FCC also has opened the door for some ILEC wiggle room, according to Steve Trotman,
TRA’s vice president of industry relations. The FCC has ruled the ILECs don’t have to
offer for resale at wholesale rates those xDSL advanced services they sell to ISPs
"as an input component to the ISPs’ retail Internet service offerings," he
explains. "What the FCC giveth, the FCC can taketh away."

This "loophole" came about through the commission’s decision regarding a Bell
Atlantic Corp. ( tariff. In a May
1999 Bell Atlantic proceeding, the incumbent filed to revise certain of its tariffs and
introduce its "Volume and Term Discount Plans" (VTDP) for its Infospeed DSL

In the filing, Bell Atlantic stated its telecom services offered under the VTDP weren’t
services it provided at retail and, therefore, weren’t subject to the rate provisions of
the Telecom Act.

TRA and telecom companies such as MCI WorldCom Inc. (
subsequently filed petitions asking the FCC to investigate. Other companies filing similar
requests included Covad Communications Co. (,
Network Access Solutions (,
CoreComm Newco Inc. (, RCN Telecom Services Inc. ( and Sprint Corp. (

The FCC’s Common Carrier Bureau (
found that Bell Atlantic’s stance raised "a significant question of lawfulness,"
and partially suspended the Bell’s tariff for five months pending an investigation. The
bureau noted in the suspension order, "the issue of the applicability of resale
discounts to advanced services offered as exchange access services was being considered in
the Wireline Advanced Services Proceeding."

It was in this wireline proceeding the bureau found that an ILEC offering of DSL
services to ISPs as an input component to the ISPs’ subsequent high-speed Internet service
offerings is not a retail offering subject to the discount requirements of Section

Since Bell Atlantic’s proposed service offering met this definition, the bureau found
no legal basis for continuing the investigation and terminated it.

The FCC says such advanced services offerings aren’t offered at retail because the ISP
"is not the ultimate end user," which means the service offerings aren’t subject
to the Telecom Act’s discounted resale rule.

"The impact of this loophole will depend in large part on whether ILECs also make
volume and term offerings of xDSL services available to business end users," Hunter

The commission says its action will enable ISPs to buy DSL services in bulk from ILECs
to offer high-speed Internet services to consumers on a more cost-effective basis.

"Consumers will ultimately benefit through lower prices and greater and more
expeditious access to innovative, diverse broadband applications by multiple providers of
advanced services," the FCC says.

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