Bells Authorized to Increase Wholesale Rates on Business Lines

It should be a matter of simple math.

But everybodys numbers dont always add up the same.

The biggest local phone companies have submitted figures to the FCC that correspond to benchmarks the agency released in a December ruling.

The benchmarks determine under what circumstances the local phone giants are freed from obligations to lease at government-mandated rates parts of their networks to rivals extending to U.S. businesses.

Now, their competitors are reviewing the data.

At stake for competitive telecommunications providers are the rates they will have to pay Verizon Communications Inc. and the other regional Bells to access certain portions of their network to support small, mid-sized and large businesses.

Rules take effect today that would authorize the Bells to increase rates by 15 percent on portions of the local network in areas where the guidelines have been met. Competitors also would be prohibited from leasing portions of the network at so-called UNE (unbundled network elements) rates to add new customers where those guidelines are met. That could lead to higher access costs for competitors like XO Communications Inc. seeking to woo businesses in U.S. cities.

Competitors are just beginning to look at the information and I think youll find disputes, says Andrew Lipman, chairman of the telecommunications, media and technology practice at Swidler Berlin, a law firm representing numerous competitive telecommunications providers.

The regional Bells have challenged portions of the FCC ruling in a federal appeals court and its competitors also are going to seek an appeal. The Bells have filed a number of requests with the U.S. Court of Appeals for the District of Columbia Circuit, including a rare petition that asks the court to tell the FCC it did not follow the courts previous instructions.

The easy answer is there will be an appeal, Lipman says.

The FCC guidelines use two main metrics to determine under which conditions the UNE pricing rules should be scrapped: the number of business lines in a Bell central office and the number of competitors that bring fiber into the facility.

For example, the UNE rates pertaining to DS1 loops would be thrown out if there are at least 60,000 business lines and four competitors bringing fiber into a central office. DS1 loops the final portion of a network extending to businesses support 24 business lines.

Lipman says the competitors do not necessarily need to be fiber-based telecommunications providers to meet the federal guideline; they could be wireless carriers, for example, if they were running fiber to the central office.

He says about 70 to 80 central offices could be impacted affecting DS1 loops at UNE rates, representing more than 10 percent of all DS1 business lines.

Its certainly not immaterial, Lipman says.

The Bells also have submitted data to the FCC affecting the rates on other portions of the network, including dark fiber, DS3 loops supporting 672 lines and transport between two central offices.

Where the guidelines are met, competitors will have to lease parts of the network at special access rates or reach a commercial agreement with the Bell to add new customers. Competitors also have other options, such as leasing a network from an alternative carrier or building their own facility.

For existing customers, competitors are required to pay 15 percent more than under UNE rates to lease certain network components. In a year, they will have to pay special access rates on their existing customers if they do not reach a commercial agreement or move off the Bell facilities.

Special access rates can be significantly higher than UNE rates, although the fees vary widely depending on the volume of business a competitor like XO books with a Bell operator.

The discounts are substantial when a competitor signs up for meaningful volume and term commitments, Lipman says.

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