TR Daily USTelecom Seeks Forbearance from ILEC Unbundling, Bell-Specific Rules
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Friday, May 4, 2018

USTelecom Seeks Forbearance from ILEC Unbundling, Bell-Specific Rules

The U.S. Telecom Association asked the FCC today to forbear from enforcing the 1996 Telecommunications Act requirements for incumbent local exchange carriers (ILECs), despite the objection of at least one member of the association.

Specifically, USTelecom asked for nationwide forbearance from the unbundling and resale mandates in section 251(c) of the Act and associated obligations in sections 251 and 252; provisions governing the relationships of Bell operating companies and their affiliates in section 271(e)(1); and the mandates for Bell operating companies to provide nondiscriminatory access to poles, ducts, conduits, and rights-of-way in section 271(c)(2)(B)(iii).

As a result of numerous mergers and acquisition over the past 22 years, AT&T, Inc., Verizon Communications, Inc., and CenturyLink, Inc., are the successors to the companies that were subject to the Bell-specific provisions of the 1996 Act.

The Telecommunications Act also granted the FCC authority to forbear from enforcing provisions of the 1934 Communications Act, as amended, which include amendments to the 1934 Act made by the 1996 Act. It directs the FCC to grant forbearance if it finds that enforcement is not necessary to ensure “that the charges, practices, classifications, or regulations by, for, or in connection with that telecommunications carrier or telecommunications service are just and reasonable and are not unjustly or unreasonably discriminatory”; that enforcement is “not necessary for the protection of consumers”; and that forbearance is “consistent with the public interest.”

However, the forbearance authority is limited with respect to section 251(c) and section 271. “Except as provided in section 251(f) [which deals with exemptions from ILEC unbundling, interconnection, and collocation requirements for rural ILECs], the Commission may not forbear from applying the requirements of section 251(c) or 271 under subsection (a) of this section until it determines that those requirements have been fully implemented,” the 1996 Act said in the forbearance provisions that became section 10 of the 1934 Act.

Section 10 states that if the FCC does not act on a petition for forbearance within one year, it will be deemed granted. The Commission can grant itself one three-month extension for consideration before the deemed-granted provision would take effect.

Kristi Moody, senior vice president and general counsel of Windstream Holdings, Inc., which is a member of USTelecom, said, “Windstream strongly opposes the USTelecom forbearance petition. This is an attempt by large incumbent providers to improperly use their market position in an anti-competitive way, especially in light of their proposal for a mere 18-month period for competitive carriers to transition away from these crucial facilities. To be clear, if this petition is granted, less competition will result, and schools, hospitals, libraries, nonprofit organizations and small and medium-sized businesses will see their rates go up.”

Meanwhile, USTelecom President and Chief Executive Officer Jonathan Spalter said in a blog post today, “[M]aybe there were some reasons for these [unbundling] rules in 1996 when Congress created them. But those days are long gone. Cable companies and other providers have built networks, and consumers have benefitted from the competitive marketplace that today is thriving. It no longer makes sense to single out a few companies and make them share their networks with their competitors. In fact, it’s unfair.”

He added, “Once the FCC forbears from these rules, consumers and the economy overall will benefit. A market analysis shows that consumer savings could reach $1 billion over the next ten years, and removing these regulatory handicaps could lead to more than $1.8 billion in new investment over the same timeframe, creating more than 6,000 jobs. Overall, forbearance has the potential to increase economic output by $5.4 billion over the next ten years.”

In the petition, USTelecom said, “Since the adoption of these mandates, there has been a staggering decline in ILEC switched access voice subscriptions, from 186 million in 2000 to a projected 35 million this year. In residential markets, only 11 percent of U.S. households are projected to have an ILEC switched voice line by the end of this year. Indeed, 60 percent of Americans will have abandoned wire line voice service entirely in favor of wireless alternatives. Of the remaining 40 percent, a majority will obtain service from a non-ILEC – often a cable company or other provider of voice over Internet protocol (‘VoIP’).”

It continued, “There is also intense competition in the business data services marketplace. That domain is quickly shifting toward packet-based offerings – over which ILECs have never enjoyed any inherent advantages – and the Commission emphasized that even the TDM [time-division multiplex] transport and channel termination service markets also are broadly competitive. As of 2013 (some five years ago now), competitive providers had deployed transport networks in the census blocks housing about 99 percent of business establishments, and the vast majority of locations exhibiting demand were within several hundred feet of competitive fiber. In residential and business markets alike, competition is overwhelmingly facilities-based. There are fewer than half as many unbundled network element (‘UNE’) loops in use today as in 2005, even as the number of non-ILEC connections has grown rapidly. The Commission's data show that, at year-end 2016, non-ILECs used UNE loops to provision less than four percent of end-user switched access and VoIP lines, and mandatory resale accounted for three percent.”

It added that “impos[ing] special burdens on providers that hold a small and shrinking share of the market distorts competition, harms consumers, and simply makes no sense.”

The petition argues, “Section 10's forbearance criteria are easily met with regard to Section 251(c)'s unbundling and resale provisions and associated obligations. Because of robust intermodal competition, the marketplace is irrevocably open to competition, such that these obligations are no longer necessary to ensure that rates and practices are just, reasonable, and nondiscriminatory, or to protect consumers. Moreover, forbearance furthers the public interest by encouraging facilities-based competition, reducing compliance costs, and freeing capital for use in deploying broadband networks and advanced services to consumers. As the appended economic analysis demonstrates, forbearance would also produce extensive economic benefits: It would save consumers over $1 billion, and perhaps up to $5.9 billion, in reduced prices over the next decade. It would increase capital investment by up to $1.8 billion, directly creating between 2,200 and 3,200 new jobs per year and exercising spillover effects that create between 4,400 and 6,400 additional jobs per year. Overall, forbearance would increase the nation's Gross Domestic Product by between $359 million and $542 million per year over the next ten years.”

It adds, “Section 10's criteria are also met with regard to Section 272(e)(l), which governs Regional Bell Operating Companies' (‘RBOCs’) relationships with their affiliates, and related obligations, such as those stemming from Section 64.1903 of the Commission's rules. These provisions, based on outdated determinations that RBOCs and ILECs possess market power, are no longer relevant in today's highly competitive marketplace, and thus are not needed to ensure just, reasonable, and nondiscriminatory charges and practices, or to protect consumers. Likewise, forbearance is in the public interest because it will eliminate regulatory disparities that no longer serve any relevant purpose.

“Finally, Section 10's criteria are met with regard to Section 271(c)(2)(B)(iii), which requires RBOCs to provide nondiscriminatory access to poles, ducts, conduits, and rights-of-way in accordance with Section 224. This provision is duplicative of the requirements for nondiscriminatory access in Section 224, and thus is not necessary to ensure that rates and terms are just, reasonable, and nondiscriminatory, or to protect consumers. The fact that ILEC ownership of poles has been declining sharply further undercuts the rationale for subjecting RBOCs to duplicative regulation in this area. Forbearance is in the public interest because the continued presence of overlapping requirements drains valuable compliance time and resources from the budgets of RBOCs (and RBOCs alone). Forbearance would eliminate these burdens and costs and establish symmetrical regulation,” it concludes.

Incompas CEO Chip Pickering responded to the forbearance petition by saying, “Big telecom’s ‘competition cut off’ will freeze broadband deployment and burn consumers and small businesses with higher bills. Cutting off access and kicking the little guy where it hurts is a brazen move, and we urge the FCC to reject the measure outright.”

He added, “The facts are clear, where smaller competitors have access and are deploying new networks, big telecom incumbents are forced to upgrade their service and lower prices. USTA’s petition delays the future and will incentivize large incumbent telecom providers to raise rates on older, slower lines for much longer.”

He continued, “Wholesale access is a bridge to fiber construction and infrastructure investment. The FCC has fully endorsed a broadband deployment agenda to help bring faster speed, lower cost networks to all Americans, including underserved rural communities. Cutting off competition and eliminating a wholesale market that incentivizes new fiber deployment runs counter to the FCC’s goals, and we encourage the Commission to reject the petition.” —Lynn Stanton, [email protected]

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