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,
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
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
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
Michael Copps (at left)
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."
Rep. Billy Tauzin (R-LA) and
Rep. Fred Upton (R-MI) stated in a
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
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
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
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
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
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
"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. Tauzin (at right), the Chairman of the
House Commerce Committee,
criticized this part of the order. He said that it is a "fatally-flawed
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.