Is the Other Shoe About to Drop?

The conversation started
out innocently enough. I asked E.J. Butler how PAETEC Communications Inc., the CLEC where he serves as COO, might offer some help to UNE-P resellers that are executing “Plan B.”

He, like others I consulted for this month’s cover story on UNE-P migration strategies (see story), was candid about where these companies might find themselves given their various market positions.

Then he said it: “UNE-L will be next - probably as fast at they [the Bells] can get their lobbyists to focus on it.”

Hmmm. At first I thought he was expressing some sour grapes over the Bells’ long history of working the regulatory machine. But, then I wondered if there was something to it.

Turns out, the competitive industry’s trade association, CompTel/ASCENT already had filed a petition with the FCC claiming that in practice DS1 loops and transport are feared to be priced out of the wholesale market without the agency’s intervention.

“While the Bells have indicated in letters sent to FCC Chairman Powell on June 14 that they will freeze rates for various network elements for approximately six months, CompTel/ASCENT expects that - left unchecked - the Bells ultimately will raise their rates for local circuit switching, high-capacity loops, dedicated transport and dark fiber by two- to 10-fold,” the association asserted in a press statement announcing its petition.

The change, put simply, is that these network elements would be made available to competitive service providers only at higher “special access” rates as opposed to TELRIC rates that now are applied to UNEs (see story).

The result of this increase, would be more than a 100 percent cost increase on average to CLECs, not to mention nearly $5 billion in price increases to small and medium businesses, according to a study by Microeconomic Consulting & Research Associates Inc. for CompTel/-ASCENT and NuVox.

Obviously, there are some CLECs like PAETEC, for instance, that already use special access services to deliver service to large enterprises requiring bandwidth in excess of T1.

But for CLECs serving SMBs, this doesn’t work very well. In fact, Butler says special access doesn’t address companies with five or fewer lines and only tackles the six-10 line market if the customer is within one or two miles of PAETEC’s PoP.

The FCC may be of the mind to let this happen. In an interview with Gartner Inc., published July 2, Chairman Powell said: “In two years, no one significant will be competing using unbundled network elements.”

With the move to special access pricing a possible reality, this assumption was incorporated into scenarios explored by The Northridge Group in this month’s cover story.

The Northridge Group has teamed with PHONE+ and XCHANGE magazines to present a workshop at the upcoming CompTel/ASCENT Conference & Expo in Miami to review the viability of potential strategies for UNE-P resellers in greater detail. To validate the results, a panel of UNE-P resellers will be on hand to speak to their experiences and findings.

For more information about this event, please visit the CompTel/-ASCENT website

I hope to see you there!

Editor in Chief

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