Be careful what you wish for

April 1, 2004

Last month's D.C. Circuit Court rejection of key parts of the Federal Communications Commission's Triennial Review order represents a clear victory for the RBOCs. But it's not the end of the war over line-sharing. Since many in the optical communications industry view the former Baby Bells as the major engine for near-term growth in the United States, it may be tempting to cheer the incumbents' efforts to remove all line-sharing requirements. Don't do it. Not only would such a result significantly impair competition and reduce consumer choice, it likely would slow the deployment of optical infrastructure in the local loop. You remember consumers, don't you? You're one yourself—and in many cases, your local incumbent still can't provide anything faster than a T1 line to your office or home.

For those of you not keeping score at home, here's a recap. The Telecommunications Act of 1996 decreed that the incumbents had to "unbundle" (i.e., make available) certain parts of their facilities for other carriers at a reasonable price if the lack of access to those facilities would impair the other carriers from offering competitive services. Most of the legal wrangling that has ensued stems from the difficulty in determining which facilities are essential to avoid impairment and how to set a reasonable rate. The FCC has twice failed in court—once before the U.S. Supreme Court and then before the D.C. Circuit Court—to get their implementation of the act to stick.

Last October, the FCC tried again in its Triennial Review of current unbundling regulations. The review upheld the necessity of sharing certain "unbundled network elements" (the infamous UNE-P). However, the FCC shifted much of the responsibility for fine-tuning UNE-P impairment issues to state regulatory agencies. The commission also ruled that the incumbents would not have to unbundle optical infrastructure (including both the cable and electronics) that they may choose to install for the provision of broadband services, save for a single narrowband channel. The idea, commissioners said later, was to provide an incentive for the incumbents to install broadband infrastructure.

Needless to say, such incentives could prove a boon to the optical communications industry, particularly companies that make passive-optical-network (PON) equipment or outside plant. And the incentive effort appears to be working, judging from the joint RFP BellSouth, SBC, and Verizon issued last summer for fiber to the premises (FTTP) equipment.

Then came last month's ruling from the D.C. District Court. FTTP proponents breathed a sigh of relief when the court upheld the FCC's optical broadband infrastructure ruling. However, the court rapped the commission's knuckles for passing unbundling regulatory authority to the states. The court set a 60-day grace period before its ruling went into effect. "This deadline is appropriate in light of the Commission's failure, after eight years, to develop lawful unbundling rules, and its apparent unwillingness to adhere to prior judicial rulings," the court order concluded.

So is this three strikes and you're out for the FCC and line-sharing? The three commissioners responsible for the Triennial Review's current configuration want to appeal the D.C. Circuit Court ruling before the U.S. Supreme Court. Even if the highest court in the land slaps down the commission again, optical industry members who know what's good for them better hope the FCC takes another run at a workable method of line-sharing. That's because if line-sharing requirements disappear, so too does the regulatory incentive for the RBOCs to deploy fiber in the access. With line-sharing in place, optical infrastructure investment offers the incumbents a competitive advantage in the provision of broadband services; without line-sharing, DSL (where it's available) likely will do just fine.

Granted, the actions of the FCC may have less effect in some instances than those of cable multiple-service operators (MSOs) when it comes to RBOC fiber deployment. The fact that Verizon has significant competition from MSOs such as Comcast probably has as much to do with the incumbent's aggressive FTTP plans as anything else. Still, BellSouth's petition to have its current fiber to the curb approach considered "good enough" to avoid line-sharing requirements indicates to me that the RBOCs would much prefer to stick with their current DSL-based approaches, all things being equal.

Therefore, it's better for the optical communications community if things remain unequal, at least when it comes to unbundling copper-based broadband infrastructure versus fiber.

Speaking of FTTP initiatives, let me take a moment to remind you that the nomination process for the FTTXcellence Award, co-sponsored by Corning and Lightwave, remains open. To nominate someone you believe deserves recognition for contributions to the deployment of FTTP in the United States, go to on the Lightwave Website.