The U.S. Court of Appeals on Friday upheld a Federal Communications Commission temporary ruling that limits certain network elements competitive carriers can lease from their rivals, the Bell operating companies, at a more favorable pricing structure than under tariff rates.
The Competitive Telecommunications Association (CompTel), a Washington D.C.-based organization representing Bell rivals, argued the FCC adopted restrictions that essentially blocked its members from leasing enhanced extended links.
Verizon Communications Inc., the No. 1 local phone company, and other incumbents provide the links to competitors over a local network, connecting phone company central offices to a customer location and providing transport from one central office to another under a wholesale pricing structure stipulated in the Telecommunications Act of 1996.
However, the FCC ruled that competitors should not be able to obtain a combination of local loops and transport from their rivals at price discounts in all circumstances if they can buy equivalent services from the incumbents and other carriers at competitive rates, said Ed Shakin, vice president and associate general counsel, Verizon.
The FCC also has noted that allowing telephone companies to lease the network elements from the incumbents under a pricing structure based on forward-looking costs could undermine competition, hurting those metropolitan access carriers that provide a combination of local loops and transport to other telephone and Internet providers.
Specifically, the FCC ruled competitors could buy the so-called EELs under such a pricing structure only if the company is using the network elements to provide "a significant amount of local exchange service," not long distance.
"This part of the network is highly competitive as are some others," BellSouth Corp., the No. 3 local phone company, said in a statement Friday following the appeals court ruling. "BellSouth is pleased that the court recognized the authority of the FCC to permit highly competitive portions of the network to remain competitive and to prevent others from gaming the system."
The appeals court ruling rejected CompTel's argument that the 1996 Telecom Act forbid the FCC from restricting the availability of unbundled network elements depending on how they would be used, a lawyer involved in the case said. However, the ruling does not settle the matter because the FCC still must issue permanent rules as part of its Triennial Review of the unbundled network element - platform.
Bell rivals must prove to the FCC they need the network elements on an unrestricted basis because there is no competitive market, the lawyer said. The appeals court ruled "'granular'" details must be compiled to determine where there is adequate competition in the metropolitan access market, he said.
"You have to go point-to-point to figure this stuff out," he said.
Over the last few months, local phone competitors and the RBOCs alike have stepped up their lobbying efforts around the so-called UNE-P, a form of resale that allows competitors to lease Bell network equipment, including switches that route phone calls, in order to provide local phone service. The FCC is expected to issue new UNE-P rules by late this year or early 2003.
Meantime, phone companies are demonstrating that the UNE-P is an effective way to increase local phone lines, gradually eating into the Bells' dominant market share. Competitors argue the platform frequently is the only profitable way to enter a new market, but the Bells claim they are being forced to lease their lines to rivals at a price that falls below what it costs them to maintain the infrastructure.
Citing Friday's ruling, SBC Communications Inc., the No. 2 local phone company, said the decision underscored its rivals' tendency to exploit rules requiring incumbents to lease portions of their network to competitors.
"The court has brought the industry one step closer to curbing the senseless exploitation of UNEs and establishing a rational approach to unbundling rules," SBC said in a statement Friday. "In their rejection of CompTel's petition, the court has put yet another '"nail in the coffin'" of the CLECs' longstanding claim that the Telecommunications Act of 1996 requires the limitless availability of UNEs."
