The FCC has granted the regional Bell companies relief from having to lease their fiber networks to competitors at regulated rates. FCC Chairman Michael Powell says this means “the digital migration is one step further along as more investment flows into the deployment of these advanced networks.” But at press time in early September, the RBOCs had not laid out any specific plans as a result of the good news they proclaimed from the Triennial Review. Meanwhile, competitive carriers say the FCC was not specific in defining key terms in the Triennial Review, which is expected to result in new court challenges.
The four Bell companies say the federal rules, which were released in late August, provide an incentive to build fiber to the home and upgrade their networks extending to businesses. These local telecom giants have long said they have no incentive to invest in new technology if they are required to lease their voice and data networks to competitors at a loss or at a rate that restricts them from generating a reasonable profit. But their plans to push fiber closer to end users are still uncertain.
“That is the significant benefit that Qwest and other incumbent telephone companies received from this decision,” says Steve Davis, senior vice president of public policy with Qwest Communications International Inc. The broadband portion of the order was the “one place the FCC got it right,” he says. In April, Qwest pledged to spend $75 million to expand broadband services throughout its 14-state territory following the FCC’s vote in February to deregulate the market. Davis says Qwest will spend more than that this year. “This order makes it more economical for us to serve smaller towns and smaller cities,” he says.
BellSouth Corp., SBC Communications Inc. and Verizon Communications Inc., meanwhile, say they have not made any grand pledges to expand broadband access following the February vote. In June, however, all three companies solicited bids from telecom equipment makers to create a standard for fiber-to-the-home technology.
Verizon, the largest local phone company, disclosed in March it was exploring ways to push fiber deeper into neighborhoods next year, but spokesman Larry Plumb said in late August the company had no update following the release of the FCC order. Verizon was still evaluating the giant Triennial Review document at press time.
SBC spokesman Michael Coe says his company has also not made any big decisions despite its request for bids on fiber-to-the-home technology. “We wanted to see what the cost would be so we could factor that into our decisionmaking,” he says. “This was another step for us to take to make our decision as to whether or not fiber would be a viable option for us.”
BellSouth spokesman Bill McCloskey says, “We have not greenlighted any projects. We want to continue going through the 500-plus pages and understand them and see where that leaves us.” The federal rules, McCloskey adds, “could still get undermined” through court challenges.
Peter Hill, vice president of technology planning and deployment with BellSouth, says that although some believe that the RBOCs got everything they wanted relating to fiber access regulatory relief in the FCC's recent order, that is not the case. "The audit has nothing to stimulate overbuild or 'brown field' deployment," he says. Hill explains that while the order doesn't require incumbent telcos to unbundle voice on fiber-to-the-home deployments in new fiber builds, they are still required to unbundle voice to competitors in areas where the ILECs update existing networks with fiber, or do "overbuilds." "Overbuilds are more expensive than greenfield, so there's not as much of an incentive," he adds. According to Hill, the order also relieves ILECs from voice unbundling only in fiber-to-thehome builds, but not in cases in which fiber is extended only to the curb, "but those are service-equivalent architectures," he says.
Following the release of the federal order, Legg Mason analysts write that regulatory relief is not the only factor that will drive fiber investment. “The Bells will invest because of a variety of issues,” a report from Legg Mason says, “including regulatory relief, equipment priced at appropriate levels, demand for services that require fiber, and most important, competitive pressures from the cable operators.”
Under the new rules laid out in the Triennial Review, the Bells still must make TDM technology available to competitors at regulated rates if they upgrade the copper network with fiber. TDM includes services like T1 lines and DS3 circuits. However, Qwest and its fellow Bells are not required to make packet-based technology available over fiber loop facilities, such as the fiber cable connecting a central office and a remote terminal.
“The broadband parts of the order granted the Bells wholly unwarranted relief,” says Joan Marsh, AT&T Corp.’s director of federal government affairs. “And for that [residential and small business] marketplace, the order essentially tells us we cannot ride their fiber for the purpose of providing a competitive service.”
The rules require the Bells to make a voicegrade channel available to competitors if the Bells upgrade a portion of their networks with fiber. Competitive phone companies still may be able to provide broadband access to homes and businesses depending on the quality of the network.
Penny Bewick, vice president of external affairs with competitive service provider New Edge Networks, says the rules also may block competitors from leasing fiber that directly links a central office and customer premises at regulated rates. However, some sources say the FCC did not specify to what extent a Bell must upgrade a network to be exempt from regulations. It is uncertain whether the new rules will apply if Verizon, for example, replaces half the network stretching from a New York central office to a remote neighborhood terminal.
Jonathan Askin, general counsel of the Association for Local Telecommunications Services, says the rules grant the Bells an inordinate amount of the relief, encouraging them to install fiber in increments, rather than an entire network. “It’s given the Bells almost as much relief if they deploy a millimeter of fiber instead of 20,000 feet,” he says. Incremental investment “does nothing to promote broadband or increase the robust capabilities of America’s telecom network.”
He adds that the regulations are ripe for litigation because the FCC’s Triennial Review does not clearly distinguish what constitutes packetbased technology and would consequently be exempt from regulation. The broadband portions of the order are “absolutely going to be challenged,” says Askin. “I imagine in almost every circuit [court of appeals] in the country.”
Tom Koutsky, vice president of law and public policy with Z-Tel Technologies Inc., agrees. He says the FCC does not clearly define packet technology. Packet-based networks can be based on new technology, but frame relay is packetbased and has been around for decades. “The FCC has some problems with regard to not outlining what it really means on a lot of things.”
