Incumbent local exchange carriers no longer can require CLECs to obtain their own licenses from third-party vendors when they attempt to purchase an incumbent's UNEs, the FCC (www.fcc.gov) ruled. The FCC believes the practice has the potential to stifle local exchange competition.
For certain network elements, such as switches, software is required for the network element to work properly, and CLECs sometimes must obtain a license for that software when they use the ILEC's facilities. But the FCC now says that the ILECs must work with vendors to get the proper licenses extended to cover CLECs using those network elements. This, in turn, fulfills the ILECs' obligations under Section 251(c)(3) of the Telecommunications Act of 1996 that allows a requesting carrier to provide telecom services.
"To conclude otherwise would be inconsistent with the intent of Congress to dismantle significant economic and legal barriers to competition," according to the FCC's decision. "Requiring a competing carrier to negotiate intellectual property licenses individually with multiple vendors with whom they may have no other business relationship could potentially pose a significant economic barrier to competition."
For example, the FCC said, CLECs could incur huge transaction costs and delays when they try to obtain such licenses before entering the local market. "Such a requirement would disproportionately threaten smaller carriers whose participation in the local exchange market Congress sought to encourage," the FCC said.
The "nondiscriminatory access" obligation of Sec. 251(c)(3) requires ILECs to provide all features and functionalities of each UNE they provide, including any associated intellectual property rights that are necessary for the requesting carrier to use the network element in the same manner as the ILEC, the FCC said.
That same section also requires ILECs to allocate any costs associated with acquiring these property rights among all requesting carriers, including themselves, the FCC ruled.
"We do not mandate a particular method of satisfying these obligations. In fact, we believe that, through negotiation, third-party vendors, incumbent LECs and requesting carriers can best determine how to ensure that an incumbent LEC lawfully provides access to unbundled network elements to requesting carriers without infringing upon the rights of third party vendors," the ruling says.
In most cases, the FCC noted, an ILEC's contract with a vendor already permits it to provide access to CLECs, but in others, it may be necessary to negotiate for additional licenses.
The FCC said it reached its conclusion in light of the fact that the ILECs control the choice of third-party vendors, the scope of contracts with those vendors, and are better situated to interpret the contracts.
If ILECs weren't required to obtain the rights for CLECs to use the network elements, the ILECs most likely would have an incentive to interpret the licenses as narrowly as possible to make it more difficult for competitors to obtain UNE access, the FCC determined.
Several ILECs said that they would be penalized for an unregulated vendor's refusal to extend an existing contract to a CLEC. But the FCC said it was "highly skeptical" that the ILECs wouldn't succeed if they used their "best efforts."
The FCC said it expects that in nearly all cases competitors will be able to access UNEs without the need for additional licenses. In fact, large equipment vendors such as Lucent Technologies (www.lucent.com) and Nortel Networks (www.nortelnetworks.com) told the FCC in their comments on this issue that, generally, no extra licenses or fees should be required when a competitor obtains access to UNEs under current contracts for a use that falls within the scope of the original license.
BellSouth Corp. (www.bellsouth.com) also said in its comments that the "magnitude of occurrence of the need for direct licenses is much more nominal" than other companies suggest. And Sprint Corp. (www.sprint.com) said that, where these intellectual property rights are implicated, the issue would be the scope of the rights granted in the original software license.
The issue arose in March 1997 when MCI Communications Corp., now MCI WorldCom Inc. (www.wcom.com), asked the FCC to declare --- among other things --- that making CLECs obtain separate licenses or right-to-use agreements before obtaining access to UNEs violated sections 251 and 253 of the Telecom Act.
"Although we do not believe that this issue is currently preventing competing carriers from being able to enter the local exchange and exchange access markets, we seek to ensure that there are no barriers to entry in the local exchange and exchange access markets," the FCC said in its ruling.
In a related ruling, the FCC last week said that Sec. 259 imposes different obligations on ILECs affecting third-party intellectual property rights.
The commission did not adopt the same "best efforts" standard in Sec. 259 cases because the federal agency said Sec. 259 applies only where non-competing carriers share access to an ILEC's "public switched network infrastructure, technology, information, and telecommunications facilities and functions."
The FCC said that ILECs in Sec. 259 cases have less incentive to deny non-competing carriers the full benefit of infrastructure sharing agreements than they would for CLEC interconnection requests made under Sec. 251.
