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August 25, 2003, 9:00 AM ET, Alert No. 725.
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Summary of FCC Triennial Review Order

8/21. The Federal Communications Commission (FCC) released its triennial review order [576 pages in PDF]. The order is consistent with the FCC's announcements made on February 20, 2003, but adds considerable detail.

This order is titled "Report and Order and Order on Remand and Further Notice of Proposed Rulemaking". The proceeding is titled "In the Matter of Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers, Implementation of the Local Competition Provisions of the Telecommunications Act of 1996, and Deployment of Wireline Services Offering Advanced Telecommunications Capability". The proceeding is numbered CC Docket No. 01-338, CC Docket No. 96-98, and CC Docket No. 98-147.

On February 20, 2003, the FCC asserted that it had adopted this order. At that time, the FCC issued only a short press release [2 pages in PDF] and an attachment [4 pages in PDF].

See also, stories titled "FCC Announces UNE Report and Order", "FCC Order Offers Broadband Regulatory Relief", "FCC Announces Decision on Switching", "Commentary: Republicans Split On FCC UNE Order", and "Congressional Reaction To FCC UNE Order" in TLJ Daily E-Mail Alert No. 609, February 21, 2003.

Unbundling Obligations. This order addresses the Section 251 unbundling obligations of incumbent local exchange carriers (ILECs). Unbundled network elements (UNEs) are those portions of telephone networks that the ILECs, such as Verizon, BellSouth, SBC and Qwest, must make available to competing carriers, such as AT&T and WorldCom, seeking to provide telecommunications services. The Telecommunications Act of 1996 provides that ILECs must provide access to certain of their network elements at regulated rates.

The ILECs, and their supporters, have long argued that requiring them to give their competitors access to their facilities at low rates gives the ILECs no incentive to build new facilities. Competive LECs, and their supporters, have argued that such access is necessary to spur competition.

47 U.S.C. § 251(c)(3) provides that ILECs have "The duty to provide, to any requesting telecommunications carrier for the provision of a telecommunications service, nondiscriminatory access to network elements on an unbundled basis at any technically feasible point on rates, terms, and conditions that are just, reasonable, and nondiscriminatory in accordance with the terms and conditions of the agreement and the requirements of this section and section 252 of this title. An incumbent local exchange carrier shall provide such unbundled network elements in a manner that allows requesting carriers to combine such elements in order to provide such telecommunications service."

Section 251 unbundling requirements were created by the 1996 Act. 47 U.S.C. § 251(d)(1) requires that "Within 6 months after February 8, 1996, the Commission shall complete all actions necessary to establish regulations to implement the requirements of this section." On two prior occasions, courts struck down the FCC's unbundling rules. This order is the FCC's third attempt. Two Commissioners, Powell and Abernathy, and two key members of Congress, Reps. Tauzin and Dingell, have already predicted that a key part of the order -- pertaining to the switching -- will be struck down too.

Local Loops: Introduction. Local loops are the lines that run from the customer's home or office to the phone company's central office. This order amends the FCC's rules to provide that "An incumbent LEC shall provide a requesting telecommunications carrier with nondiscriminatory access to the local loop on an unbundled basis, in accordance with section 251(c)(3) of the Act", subject to the terms and exceptions contained in the rules changes.

The rules provide that "An incumbent LEC shall provide a requesting telecommunications carrier with nondiscriminatory access to the copper loop on an unbundled basis." This is a continuation of the current requirement. The new rules also provide that there is no unbundling requirement for fiber to the home (FTTH) loops. With respect to hybrid loops, there is no unbundling requirement for a transmission path over hybrid loops utilizing the packet switching capabilities of their DLC systems in remote terminals. However, ILECs must still provide unbundled access to a voice grade equivalent channel and high capacity loops utilizing TDM technology, such as DS1s and DS3s.

Local Loops: FTTH. The rule defines "fiber-to-the-home loop" as "a local loop consisting entirely of fiber optic cable, whether dark or lit, and serving a residential end user's customer premises." The rule provides that for new builds, "An incumbent LEC is not required to provide nondiscriminatory access to a fiber-to-the-home loop on an unbundled basis when the incumbent LEC deploys such a loop to a residential unit that previously has not been served by any loop facility."

For overbuilds, the rule provides that "An incumbent LEC is not required to provide nondiscriminatory access to a fiber-to-the-home loop on an unbundled basis when the incumbent LEC has deployed such a loop parallel to, or in replacement of, an existing copper loop facility," with certain exceptions.

The ILEC must maintain the existing copper loop connected to the particular customer premises after deploying the FTTH loop and provide nondiscriminatory access to that copper loop on an unbundled basis unless the ILEC retires the copper loop, in which case, the ILEC must "provide nondiscriminatory access to a 64 kilobits per second transmission path capable of voice grade service over the fiber-to-the-home loop on an unbundled basis."

Leonard Ray, of the Fiber to the Home Council, stated at a tutorial at the FCC on August 7 that 70% of the homes passed by fiber are overbuilds, rather than new builds. See, story titled "FCC Hosts Tutorial on Fiber to the Home" TLJ Daily E-Mail Alert No. 715, August 11, 2003.

The FTTH provisions are one of the broadband deregulatory measures contained in the order. Others include the phasing out the line sharing requirement (see, discussion below under "Local Loops: Copper"), and deregulating packet switching functions (see, discussion below). These changes are a major victory for ILECs, such as Verizon

Verizon announced in a March 19, 2003 release that "DSL is a first-generation broadband technology used with copper lines. However, Verizon already is serving most larger businesses on fiber links, and the company expects that fiber-optic technology ultimately will become the preferred communications medium to reach homes as well as businesses. Verizon is exploring ways to advance its broadband deployment in 2004, including deploying fiber into neighborhoods and even bringing fiber to the premises of an initial set of customers." See also, story titled "Verizon Says It Has Broadband Deployment Plans" in TLJ Daily E-Mail Alert No. 627, March 20, 2003.

Commissioners Powell, Abernathy and Martin supported providing regulatory relief for FTTH, while Commissioners Copps and Adelstein dissented. However, on the line sharing issue  Commissioners Martin, Adelstein and Copps made up the majority.

Michael CoppsCommissioner Michael Copps (at left) issued a release on August 21 in which he reiterated his opposition to this provision, and other provisions that provide broadband related regulatory relief. He wrote, "Make no mistake about it, today's decision chokes off competition in broadband. Consumers, innovation, entrepreneurs and the Internet itself are going to suffer."

"Instead of preserving, protecting and defending competition, the Commission has torn away access to the network architectures that undergird broadband competition. As a result, consumers, including our nation’s small businesses --the engines of so much entrepreneurial activity and economic growth -- may well be stuck without competitive choices and prices when it comes to critical broadband services. This is not a brave new world of broadband, but simply the old system of local monopoly dressed up in a digital cloak", wrote Copps. "We may be headed in the direction of a broadband policy blackout from which we will not soon recover. Down the road are the dark consequences of a decision to reclassify broadband service and further close off access to essential facilities. At risk is our unfettered access to the information, content and technologies the Internet has to offer."

In contrast, Rep. Billy Tauzin (R-LA) and Rep. Fred Upton (R-MI) stated in a joint release that "The deregulation of fiber and packet-switched facilities will provide the right incentive for all carriers to deploy these facilities as rapidly and ubiquitously as possible. That type of deregulatory investment climate will hopefully lift our ailing high-tech manufacturing sector out of the doldrums."

Michael Petricone, VP for Technology Policy of the Consumer Electronics Association (CEA), praised the broadband deregulatory provisions of the triennial review order. He wrote in a statement that "Yesterday's release of the final rules to deregulate last mile broadband facilities is a giant leap toward making universal adoption of broadband a reality."

Similarly, the High Tech Broadband Coaltion (HTBC) stated in a release that it "applauds the FCC's release today of its rules to deregulate last mile broadband facilities. We look forward to reviewing the Commission's decision in detail, but by adopting the main elements of the HTBC's proposed unbundling rules for such facilities, the decision should promote both broadband deployment and competition. The regulatory demarcation between legacy copper and packetized capacity will restore necessary incentives for last mile broadband investment and make true broadband more widespread and affordable."

Local Loops: Copper. The rule provides that "An incumbent LEC shall provide a requesting telecommunications carrier with nondiscriminatory access to the copper loop on an unbundled basis." It also defines the term "copper loop" as "a stand-alone local loop comprised entirely of copper wire or cable. Copper loops include two-wire and four-wire analog voice-grade copper loops, digital copper loops (e.g., DS0s and integrated services digital network lines), as well as two-wire and four-wire copper loops conditioned to transmit the digital signals needed to provide digital subscriber line services, regardless of whether the copper loops are in service or held as spares. The copper loop includes attached electronics using time division multiplexing technology, but does not include packet switching capabilities ..."

Moreover, the definition of copper loops excludes packet switching capabilities. Also, there are separate provisions for DS1 and DS3 copper loops.

The new rules eliminate line sharing as an unbundled network element. The rule defines "line sharing" as "the process by which a requesting telecommunications carrier provides digital subscriber line service over the same copper loop that the incumbent LEC uses to provide voice service, with the incumbent LEC using the low frequency portion of the loop and the requesting telecommunications carrier using the high frequency portion of the loop." The rule now provides that "the high frequency portion of a copper loop shall no longer be required to be provided as an unbundled network element", subject to a three year transition.

The rule provides temporary relief for CLECs currently utilizing line sharing. It provides that "An incumbent LEC shall provide a requesting telecommunications carrier with the ability to engage in line sharing over a copper loop, between the effective date of the Commission's Triennial Review Order and three years after that effective date, where the requesting telecommunications carrier began providing digital subscriber line service to a particular end-user customer on or before the date one year after that effective date."

The line sharing provisions of the rules provide regulatory relief to the ILECs. However, the line sharing provisions do not share the same rationale as some of the other broadband related provisions. That is, the main rationale for not requiring an ILEC to provide unbundled access to FTTH loops is to incent ILECs to invest in deploying fiber networks. In the case of line splitting, the copper networks already exist. Moreover, by providing regulatory relief in the area of line splitting, the rule provides ILECs a disincentive to build new, more advanced, networks, such as fiber.

The new rule also addresses line splitting, which it defines as "the process in which one competitive LEC provides narrowband voice service over the low frequency portion of a copper loop and a second competitive LEC provides digital subscriber line service over the high frequency portion of that same loop." The rule provides that "An incumbent LEC shall provide a requesting telecommunications carrier that obtains an unbundled copper loop from the incumbent LEC with the ability to engage in line splitting arrangements with another competitive LEC using a splitter collocated at the central office where the loop terminates into a distribution frame or its equivalent."

The rule also provides that ILECs cannot retire any copper loops or subloops without satisfying "Any applicable state requirements".

Local Loops: Hybrid. The rule defines "hybrid loop" as "a local loop composed of both fiber optic cable, usually in the feeder plant, and copper wire or cable, usually in the distribution plant". It provides that there is no unbundling requirement of packet switching functions, but the ILEC must provide unbundled access to voice grade service.

The rule provides that "When a requesting telecommunications carrier seeks access to a hybrid loop for the provision of narrowband services, the incumbent LEC may either: (A) Provide nondiscriminatory access, on an unbundled basis, to an entire hybrid loop capable of voice-grade service (i.e., equivalent to DS0 capacity), using time division multiplexing technology; or (B) Provide nondiscriminatory access to a spare home-run copper loop serving that customer on an unbundled basis."

It also addresses packet switching capabilities. It provides that "An incumbent LEC is not required to provide unbundled access to the packet switched features, functions and capabilities of its hybrid loops." It defines "packet switching capability" as "the routing or forwarding of packets, frames, cells, or other data units based on address or other routing information contained in the packets, frames, cells or other data units, and the functions that are performed by the digital subscriber line access multiplexers, including but not limited to the ability to terminate an end-user customer’s copper loop (which includes both a low-band voice channel and a high-band data channel, or solely a data channel); the ability to forward the voice channels, if present, to a circuit switch or multiple circuit switches; the ability to extract data units from the data channels on the loops; and the ability to combine data units from multiple loops onto one or more trunks connecting to a packet switch or packet switches."

The rule also contains a provision regarding broadband services over hybrid loops that was not described in the FCC's releases of February 20. The rule provides that "When a requesting telecommunications carrier seeks access to a hybrid loop for the provision of broadband services, an incumbent LEC shall provide the requesting telecommunications carrier with nondiscriminatory access to the time division multiplexing features, functions, and capabilities of that hybrid loop, including DS1 or DS3 capacity (where impairment has been found to exist), on an unbundled basis to establish a complete transmission path between the incumbent LEC’s central office and an end user’s customer premises. This access shall include access to all features, functions, and capabilities of the hybrid loop that are not used to transmit packetized information."

Local Loops: Subloops. The rule also addresses subloops. It provides that "An incumbent LEC shall provide a requesting telecommunications carrier with nondiscriminatory access to subloops on an unbundled basis", as set forth in the rule.

In particular, the rule provides that "An incumbent LEC shall provide a requesting telecommunications carrier with nondiscriminatory access to the subloop for access to multiunit premises wiring on an unbundled basis regardless of the capacity level or type of loop that the requesting telecommunications carrier seeks to provision for its customer." The rule further defines "subloop for access to multiunit premises wiring" as "any portion of the loop that it is technically feasible to access at a terminal in the incumbent LEC’s outside plant at or near a multiunit premises."

Switching. The rule provides that "An incumbent LEC shall provide a requesting telecommunications carrier with nondiscriminatory access to local circuit switching, including tandem switching, on an unbundled basis ..." While the triennial review order will incent and benefit ILECs in their deployment of new broadband networks, the order's provision pertaining to switching will benefit CLECs and IXCs.

The rule provides that switching, a UNE-P element, for business customers served by high-capacity loops such as DS1 will no longer be unbundled based on a presumptive finding of no impairment. But, states will have 90 days to rebut the national finding. Also, for mass market customers, the rule sets out specific criteria that states shall apply to determine whether economic and operational impairment exists in a particular market. State public utilities commissions must complete such proceedings within 9 months.

The new rules are recited in Appendix B of the triennial review order. See especially, § 51.319(d), which addresses, at great length, the specific unbundling requirements for local circuit switching.

Like the broadband related provisions, the switching provisions are controversial. The majority on the FCC supporting the switching provisions was made up of Commissioners Martin, Copps, and Adelstein, with Commissioners Powell and Abernathy dissenting.

CLECs, IXCs and the groups that represent them praised the switching provisions of the order. For example, AT&T's Robert Quinn stated in a release that "The Order ensures competitors access to essential network elements as long as impairments to competition continue and thus guarantees consumers a choice of local service providers wherever UNEs are accurately priced under the FCC's pricing rules. Significantly, the Order relies heavily on the expertise of the individual State commissions not only to identify barriers to competition, but also to take the steps necessary to eliminate these barriers."

In contrast, ILECs criticized this part of the order. For example, Steve Davis of Qwest stated in a release that "we remain disappointed with the majority's decision to allow other companies, notably AT&T and MCI, to continue to use our network at below-cost rates rather than invest in facilities of their own. It's unfair to Qwest customers that they continue to be forced to subsidize these giant corporations. We will work with each of our state commissions to do what the FCC was charged with doing, but failed -- eliminate these subsidies wherever possible, as soon as possible."

BellSouth's Margaret Greene stated in a release that "it looks like the Commission has abdicated its responsibility to set a national definition to determine when a competitor's operations are 'impaired' if that competitor doesn't get to share our network at below cost pricing. Throughout the country there are switches and other network elements available on the open market. The federal court has already ruled that forced access to BellSouth's network isn't necessary if there are other places on the open market that competitors can go to get the technology they need."

Greene continued that "The FCC has thus apparently, for a second time, ignored the Court's directives and has done so in a way that would require us to continue to subsidize our competitors for at least another four years. As we continue to review the order, we will be looking for and evaluating whether the FCC set forth a legally supportable analysis of 'impairment' that the Telecommunications Act of 1996 requires."

Rep. Billy TauzinRep. Tauzin (at right), the Chairman of the House Commerce Committee, criticized this part of the order. He said that it is a "fatally-flawed scheme".

For example, he stated that "Instead of the Commission doing its job and making unbundling determinations, the judgment will be made by fifty-one regulatory bodies and will likely be appealed to 12 different federal appellate jurisdictions. This will perpetuate uncertainty for years to come."

He also argued that "The so-called triggers established by the majority are unrealistic given the limitation imposed."

Also, Rep. Tauzin stated that "States are given carte blanche to determine what constitutes a market for the unbundling analysis, except that a state regulatory body could not define an entire state as the relevant market.  This rule will enable state public utility commissions (PUCs) that want to perpetuate UNE-P to game the definition of a market to ensure that the triggers are never met."

Network Interface Devices. The order also addresses network interface device elements, which it defines as "any means of interconnection of customer premises wiring to the incumbent LEC’s distribution plant, such as a cross-connect device used for that purpose".  The rule provides that "an incumbent LEC also shall provide nondiscriminatory access to the network interface device on an unbundled basis".

Transport. The order also addresses dedicated transport. See, rule changes to § 51.319(e).

FCC also published a list [2 pages in PDF] of Wireline Competition Bureau personnel to serve points of contact for question about the Triennial Review Order.

People and Appointments

Gordon England8/22. President Bush announced his intent to nominate Gordon England (at right) to be Secretary of the Navy. He is currently Deputy Secretary of the Department of Homeland Security. Before that, he was Secretary of the Navy. Before that, he was EVP of General Dynamics, where he was responsible for information systems. And before that, he was EVP of the Combat Systems Group at General Dynamics. His undergraduate degree is in electrical engineering. See, White House release. Tom Ridge, the Secretary of Homeland Security, stated in a release that England's "experiences with mergers and the establishment of complex management and organizational systems have been critical to the effective start of the new department. One of his legacies of service will be his effort to lay the foundation for this new department."

8/22. President Bush made recess appointments of Charlotte Lane and Daniel Pearson to be a members of the U.S. International Trade Commission (USITC). President Bush nominated Lane on June 7, 2002 and again on January 9, 2003. President Bush nominated Pearson on November 14, 2002 and again on January 9, 2003. See, White House release. The Congress is currently in recess. These appointments avoid the Senate confirmation process. The Constitution provides that "The President shall have Power to fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session." The USITC has authority under Section 337 (19 U.S.C. § 1337) to investigate unfair practices in import trade involving infringement of patents, copyrights, trademarks, and other intellectual property rights.

Michael Gallagher8/22. Federal Communications Commission (FCC) Chairman Michael Powell commented on President Bush's announcement on August 21 that he intends to nominate Michael Gallagher (at right) to be the head of the National Telecommunications and Information Administration (NTIA). The NTIA and FCC share spectrum management responsibilities. Powell stated that "As NTIA Deputy, Mike made significant contributions to a number of important initiatives and proceedings where the FCC and NTIA were coordinating efforts and resources. He is a highly knowledgeable and dedicated public servant and will continue be a great asset to the Department of Commerce. I have enjoyed a close working relationship with Nancy Victory in her years as head of NTIA, and look forward to continuing this spirit of cooperation with Mike Gallagher at the helm." See, FCC release [PDF].

Monday, August 25

The House is in recess until September 3. Senate is in recess until September 2. The Supreme Court is in recess until October 6. (The Supreme Court will meet in special session to hear oral arguments in McConnell v. FEC on September 8.)

10:00 AM - 4:00 PM. The Commerce Department's (DOC) National Medal of Technology Nomination Evaluation Committee will hold a closed meeting to discuss the relative merits of persons and companies nominated for the medal. See, notice in the Federal Register, July 24, 2003, Vol. 68, No. 142, at Page 43716. Location: Room 4813, DOC, 1401 Constitution Ave., NW.

10:00 AM. Several groups will hold a press briefing regarding the new Computer Assisted Passenger Pre-screening System (CAPPS II). The participants will include James Dempsey (Center for Democracy and Technology), Laura Murphy (ACLU), former Rep. Bob Barr (R-GA), David Keene (American Conservative Union), Grover Norquist (Americans for Tax Reform), and Hilary Shelton (NAACP). Location: Lisagor Room, National Press Club, 529 14th St. NW, 13th Floor.

Thursday, August 28

10:00 - 11:45 AM. The American Enterprise Institute (AEI) will host a panel discussion titled "Is There Any Development in the Doha Development Agenda?" The speakers will be Michael Finger (AEI), Arvind Panagariya (University of Maryland), and Sarath Rajapatirana (AEI). See, notice. Location: AEI, 12th Floor, 1150 17th Street, NW.

Sunday, August 31

Deadline to submit comments to the National Institute of Standards and Technology (NIST) regarding its second public draft [62 pages in PDF] of its publication titled "Guide for the Security Certification and Accreditation of Federal Information Systems". This is NIST Special Publication 800-37 authored by Ron Ross and Marianne Swanson. Comments may be submitted to

Monday, September 1

Labor Day. The FCC, FTC, USITC and other federal government agencies will be closed.

Tuesday, September 2

The Senate will return from its August recess.

The Treasury Department's and the Internal Revenue Service's (IRS) will hold a public meeting regarding their notice of proposed rulemaking (NPRM) regarding regulations that "affect certain taxpayers who participate in the transfer of stock pursuant to the exercise of incentive stock options and the exercise of options granted pursuant to an employee stock purchase plan (statutory options)." See, notice in the Federal Register, June 9, 2003, Vol. 68, No. 110, at Pages 34344 - 34370.

Wednesday, September 3

The House will return from its August recess.

1:00 PM. The House Commerce Committee's Subcommittee on Telecommunications and the Internet will hold a hearing titled "Digital Dividends and Other Proposals to Leverage Investment in Technology". The hearing will be webcast. See, notice. Location: Room 2123, Rayburn Building.

Deadline to submit comments to the Federal Communications Commission (FCC) in response to its notice of proposed rulemaking (NPRM) regarding making more spectrum available for unlicensed devices, including WiFi, in the 5 GHz band. See, stories titled "FCC Adopts NPRM to Increase Unlicensed Spectrum" in TLJ Daily E-Mail Alert No. 663, May 16, 2003; "FCC Releases NPRM Regarding Increasing Amount of Unlicensed Spectrum" in TLJ Daily E-Mail Alert No. 674, June 5, 2003, and "Delegates Discuss World Radiocommunications Conference" in TLJ Daily E-Mail Alert No. 703, July 22, 2003. See also, notice in the Federal Register, July 25, 2003, Vol. 68, No. 143, at Pages 44011 - 44020. This is ET Docket No. 03-122. The FCC adopted this NPRM on May 15, 2003, and released June 4, 2003.

Thursday, September 4

The Federal Communications Commission's (FCC) changes to its media ownership rules, announced on June 2, 2003, take effect. See, notice in the Federal Register that recites and describes the rules changes. See, Federal Register, August 5, 2003, Vol. 68, No. 150, at Pages 46285 - 46358.

Friday, September 5

9:30 - 11:30 AM. The American Enterprise Institute (AEI) will host a seminar titled "The New World of E-Commerce Taxation". The speakers will be Michael Greve (AEI), Daniel Shaviro (NYU School of Law), and Kevin Hassett (AEI). See, notice. Location: 12th Floor, AEI, 1150 17th Street, NW.

Deadline to submit reply comments to the Federal Communications Commission (FCC) in response to its Notice of Inquiry [21 pages in PDF] in its proceeding titled "In the Matter of Inquiry Regarding Carrier Current Systems, including Broadband over Power Line Systems". See, notice in the Federal Register, May 23, 2003, Vol. 68, No. 100, at Pages 28182 - 28186. See also, story titled "FCC Announces NOI Regarding Broadband Over Powerlines" in TLJ Daily E-Mail Alert No. 628, April 24, 2003, and story titled "FCC Releases NOI on Broadband Over Power Lines" in TLJ Daily E-Mail Alert No. 656, May 7, 2003.This is ET Docket No. 03-104. For more information, contact Anh Wride at 202 418-0577 or

12:00 NOON. Deadline to submit requests to testify orally at the September 18, 2003 hearing of the U.S. Trade Representative's (USTR) interagency Trade Policy Staff Committee (TPSC) to assist it in preparing its annual report to the Congress on the People's Republic of China's compliance with the commitments that it made in connection with its accession to the World Trade Organization (WTO). See, notice in the Federal Register, July 21, 2003, Vol. 68, No. 139, at Pages 43247 - 43248.

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