FCC LIKELY TO LOOSEN UNE, AT&T SAYS

FCC is likely to loosen some unbundled network elements (UNE), said AT&T Gen. Counsel James Cicconi during debate on broadband at Federal Communications Bar Assn. conference Fri. Cicconi said noteworthy part of ruling will be “how the Commission views the important problems of switches,” he said, adding Bell companies have been unwilling or unable to facilitate the “hot cut” process.

Walter McCormick, USTA Pres., said UNE-Platform (UNE-P) was “driving ILECs into the ground.” McCormick said there’s little correlation between Bells’ gaining of access to long distance lines and CLECs gaining access to local lines because many long distance carriers built their own facilities. “They're not doing that in the local market,” he said. McCormick called UNE-P “virtual competition.”

Debate on UNE-P between Cicconi and McCormick emerged from session titled: “Time for Broadband Deregulation?” McCormick said UNE-P was getting heavy attention during broadband session because “the broadband debate has matured and we're getting to the heart of the matter.” Cicconi said UNE-P and broadband debate are both about access to last-mile facilities. “It’s about if we'll have competition,” Cicconi said: “Efforts to deny access to elements are at the core of the broadband debate.” Like UNE-P, McCormick said, broadband debate is effort to have deflationary regulations placed on ILECs. But Cicconi said wholesale market is important for telecom industry. “No one in this industry has everything,” Cicconi said. “If we're going to act as a mature industry, we need to understand that wholesaling is a good thing.”

Broadband regulation is attempt to apply legacy voice regulations to new services, McCormick said. Every market in the country has competitive broadband service, making legacy rules unnecessary for broadband, he said. Cicconi said broadband issue isn’t availability, because 80% of Americans have access to DSL, but price. “If prices come down, people will take broadband,” Cicconi said. “The only way is through competition.” Cicconi said broadband debate should focus on existing DSL facilities that have been built, adding that deployment of fiber to home is often confused with broadband discussion.

In panel on telecom future, Robert Pepper, chief-FCC Office of Plans & Policy, said demand for telecom and Internet services is still “growing significantly.” Advances in technology could continue to surprise industry observers, Pepper said, like fast adoption of Wi-Fi wireless Internet has. “Now one saw that coming,” Pepper said. Use of power lines to deliver Internet, use of unregulated spectrum and Internet telephony are just some areas where technology could advance, he said. Microsoft could play larger role in telephony in future, Pepper said. Cable telephony is another area of likely technological advance, said Raymond Katz of Bear Stearns. Katz said cable telephony probably won’t be available until 2004, at the earliest.

Recent report by FCC’s spectrum management task force does solid job of highlighting issues with spectrum reform, said Susan Ness, former FCC commissioner. In future, FCC’s likely to study “noise level” issues, which could allow for some limited operation in licensed bands, she said. She also said there would likely be efforts in future to expand 3G wireless services. Pepper said spectrum would be big issues for FCC for next several years.

Lowering price of broadband for commercial use is critical for online commerce, said Terabeam CEO Daniel Hesse. Business opportunities will “explode” when highest-speed access prices fall to that currently charged for T1 lines, Hesse said. Also, Katz said AOL would likely switch its business plan from providing Internet access to providing unique content online.

In rundown on pending FCC court decisions, Deputy Gen. Counsel John Rogovin said U.S. Supreme Court oral argument this fall in NextWave case was “tough going… We're hoping for the best but planning for the worst.” In case of companion May rulings by U.S. Appeals Court, D.C., on FCC’s unbundled network element (UNE) remand order and line- sharing, govt. decided to not seek review. AT&T, Covad and WorldCom petitioned high court earlier this month to overturn ruling, citing extent to which it conflicted with 2 previous Supreme Court decisions. In response to audience question, Rogovin said FCC worked closely with Solicitor General’s Office on whether to file its own challenge. “They were quite concerned that this was a case that wouldn’t present as good a vehicle as they would have liked to tee up for the Supreme Court some of these issues,” he said. “They were quite concerned that we, at the FCC, were in the middle of the Triennial Review but would be coming out with an order very much in the near term.”

In contrast to some of pricing and jurisdictional issues in that area on which 8th U.S. Appeals Court, St. Louis, had ruled, D.C. Circuit’s conclusions in USTA case didn’t contain kind of “bright line” that made ideal scenario for govt. to seek challenge at Supreme Court, although Rogovin said pending telco petition for review was thorough. USTA v. FCC decision by D.C. Circuit in May had sought greater level of granularity in Commission’s uniform unbundling requirements, which probably was in line with where FCC was headed in that area anyway, Rogovin said. “One of the issues that has given us concern is that we didn’t get a sense of the same kind of deference from this decision as we had seen in the Verizon Supreme Court case,” he said, referring to high court decision on TELRIC pricing rules in Verizon v. FCC. “There is in fact tension between the USTA decision and the Verizon decision and that will be interesting to see how that plays out when the FCC tackles the Triennial Review.”

FCC’s phase-out of wireless spectrum cap on Jan. 1 might lead to merger proposals between nationwide carriers, said Nancy Goodman, chief of Justice Dept.’s telecom and media enforcement section, on separate panel Fri. In past, DoJ’s examination of wireless merger proposals generally involved carriers with different geographic footprints, she said. Next wave of mergers is likely to involve carriers with larger degree of overlap, she said: “We are certainly going to take a look at that, although I can’t predict exactly how we'll come out.”

Noting there had been periodic buzz about possibility of RBOC-IXC merger, Goodman said in past speculation had centered on impact of such unions on vertical services. “I think because of the way the world has changed, we probably are going to be looking at both vertical and horizontal issues,” she said. This has evolved as IXCs have emerged as providers of local service and as RBOCs have stepped up their Sec. 271 long distance entry in some states, she said.

Market definition for DoJ in telecom area is “very dynamic” compared with past differentiation between local landline, long distance landline and wireless, Goodman said. As bundling of services continues, including all-distance offerings on wireless side, Goodman said she would expect mergers involving those segments could involve claims that those markets were converging. She said financial condition of telecom industry could come into play when merger proposals were evaluated. Use of “failing firm” defense in merger reviews, for example, requires that company be in severe financial shape and there be no alternative buyer that would pose fewer competitive risks, she said. Financial conditions also could emerge when DoJ looks at market barriers that could make it difficult for companies to get financing to compete, which could mean entry barriers to sector are higher, she said.

While merger review of Committee on Foreign Investment in U.S. (CFIUS) has always been stringent, after Sept. 11 that process involved “even more careful analysis,” said David Gross, U.S. coordinator for international communications & information policy at State Dept. CFIUS is national security agency composed of 11 govt. agencies that monitor acquisition of U.S. companies by foreign entities concerning technologies with national security implications. “CFIUS is an area you need to pay attention to,” Gross said.

In area of spectrum availability for unlicensed services, NTIA Dir. Nancy Victory said her agency was interested in how to make more capacity available. But NTIA doesn’t have “immediate plans” to transfer spectrum from govt. to private sector for that purpose, she said. She noted FCC and NTIA had agreed on plan this year to carve out 90 MHz of 3G spectrum, which led to proposal and allocation order by FCC last month for 2 blocks of 45 MHz of contiguous spectrum. “We are looking at what technology can do to allow us to find more spectrum and this is through sharing techniques and interference criteria,” she said: “We actually think that technology is going to be the key to finding spectrum for more services more quickly in the future.” -- Terry Lane, Mary Greczyn

FCBA Notes…

Rule changes for Multipoint Distribution Service (MDS) will be “major priority” for FCC Wireless Bureau in coming year, Bureau Chief Thomas Sugrue told Practising Law Institute/FCBA conference last week. Noting industry had submitted proposed rule changes, Sugrue said FCC could open rulemaking on that issue in first quarter of next year. In 800 MHz restructuring proposal -- in which public safety groups, Nextel and some private wireless operators have submitted plan for alleviating public safety interference in that band -- Sugrue said FCC was awaiting follow-up filing. Nextel and other parties had planned to make supplemental filing at FCC by Thanksgiving addressing issues such as private wireless retuning costs and border problems. That filing “is a bit overdue now,” Sugrue said, and Commission “looks forward to receiving that.” As for mobile satellite service (MSS), Sugrue said CTIA had reallocation petition before FCC for terrestrial use of some of that spectrum, along with New ICO’s ancillary terrestrial component (ATC) request and several milestone build-out decisions. “We were hoping to do that by the end of the year,” he said. “If not by the end of the year, then shortly into the new year.” In other areas, FCC had announced rulemaking on secondary markets policy for spectrum in 2001, including questions such as how to update transfer of ownership evaluations. Idea of secondary markets also came up among spectrum management alternatives raised in Spectrum Policy Task Force report. “The time is right to address this in the early part of next year,” Sugrue said. He said wireless service quality was area that was getting increased attention. “You have to get on top of this service quality issue,” he said. “It’s something that needs to be taken fairly seriously.”