Forbearance Can Impact Telecom Choices

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Its been almost eleven years when the Telecom Act of 1996 was announced with much fanfare. It promised a telecom revolution, and instead it got a Bubble, Broadbandits and a battle of the lobbyists. And as they years passed, incumbents neutered it beyond recognition, leaving it toothless and lifeless, much like the royal family of a fallen colonial power. Sure there were some things that microscopically-tilted in favor of the small, independent carriers, but even those are at risk now.

Verizon has petitioned FCC to give it forbearance relief in six major markets from certain wholesale requirements, specifically “unbundled network element” (UNE) discounts it must still provide to competitive local exchange carriers (CLECs). What this means is that Verizon wants to stop selling high-capacity DS-1 and DS-3 connections because it feels competitors are using Verizon’s infrastructure to compete for the enterprise customers.

According to FCC, under the Telecom Act of 1996, “the Commission is required to forbear from any statutory provision or regulation if it determines that the regulation is not needed to protect consumers or to ensure just and reasonable rates and practices by carriers.” Verizon wants FCC to stop applying UNE rules in major metros like New York, Philadelphia and Boston. Verizon has been fighting UNE for sometime. UNE allows competitors to buy “network elements” on a cost-basis. FCC is supposed to decide on this on December 5th.

If FCC approves Verizon’s petition, then basically the competition in local loop in those six regions is going to be decline sharply and that is bad news for smaller CLECs such as Covad and XO Communications. These companies rely on UNE to provide alternative broadband and phone service options.

CLECs are worried that Verizon is going to use any gains from this petition and stamp out competition in other regions such as California and Texas. CLECs have set-up a website, FreeToCompete. Blair Levin, an analyst with Stifel Nicolaus, an investment bank, and an expert on FCC doesn’t believe that Verizon is going to get what it is wishing for and only small parts of Verizon’s petitions might be granted.

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Toledo Dave

In our market it was the cable company that killed the independent ISPs. I owned an ISP in the 90’s, established a partnership with the cable company, helped them to launch cable modems into the market. Along the way I tried to convince them to allow the other ISP’s onto their network to also sell broadband service to their customers. The cable company’s thinking was why share when we can own it all, which they’ve pretty much done. I sold to them and did pretty well. When I left, they had 15,000 cable modem customers, now they have close to 100,000 plus another 50,000 using their cable modem phone service.

Around the same time the cable company launched cable modems, they also started a CLEC. For them, thanks to the the Telecom Act of 1996, it was like stealing candy from a baby. They went in and undercut the local incumbent on T1’s and voice services taking a big chunk of SBC’s business . So I can understand the incumbents now wanting to stop competition that they in essence helped to build.

It will get interesting when they really begin to roll out video services and go head to head with the cable companies. Hopefully, the consumers will be the ultimate winners with that competition.

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