February 27, 2002 -- A coalition of Competitive Local Exchange Carriers (CLECs) has asked the Tennessee Regulatory Authority to make sure that local competition can develop for the state's residential and small business customers. Led by Macon, Ga.-based Access Integrated Networks (AIN), the telecommunications companies filed a petition on February 25 with the Tennessee Regulatory Authority (TRA), requesting that it assert state rights beyond federal minimum standards to regulate BellSouth's unbundled local switching rates and continued access to the local exchange network.

The petition urges the regulatory agency to enact state measures granted by the Telecommunications Act of 1996 to ensure citizens experience the benefits of lower costs, product innovation and freedom of choice when selecting a local telephone service provider.

This is the second petition filed in BellSouth's nine-state territory. Last week, AIN and other CLECs took similar action in Georgia.

"It's been six years since the market for local telephone service was opened to competition," says Rodney Page, AIN's vice president of marketing and strategic development. "It took a long time to work out technical issues with the incumbent service provider, and CLECs only have a 5.2 percent market share in Tennessee today. Just when consumers are beginning to experience the benefits of competition, the Federal Communications Commission (FCC) is considering changing the rules. The TRA is in a much better position than federal authorities to judge the needs of Tennessee consumers and businesses."

There is industry concern that the incumbent phone company monopolies will seek to deny competitors access to the network in a proceeding before the FCC. "These incumbent monopolies aren't stupid. They know what competitive strategies have a chance of success and they are devoting all their political resources to eliminating them," according to Joseph Gillan, an Orlando-based economist and telecommunications consultant, who filed testimony related to the petition. "If the TRA wants to ensure competition continues, they must act to assure entrants retain access to the "network platform" needed to offer competitive services." Similar activities are occurring in states throughout the nation. New York and Illinois have recently enacted protective measures and the issue is currently under review in Texas.

Three modes of entry exist for businesses that want to enter the local exchange market:

- Facilities-based CLECs, which must invest in and construct switching and transmission infrastructure redundant to an ILEC's (Incumbent Local Exchange Carrier).

- Resale, which enables the CLEC to purchase service from the incumbent at a discount and resell it to customers.

- Unbundled Network Elements-Platform (UNE-P), which enables the CLEC to lease switching and transmission services from an ILEC and provide additional telecommunications products and services.

"Facilities-based CLECs cannot develop networks to compete broadly for the typical residential or small business customer," explains Page. "Resellers lack the ability to differentiate their services, so there is little significant marketplace benefit to consumers. The "network platform" method of entry is the best option to serve the mass market in a meaningful manner and is best aligned with public interests because it promotes the rapid introduction of competition, appeals to a broad cross section of customers and offers a wide geographic reach."

Gillan agrees. "The network platform strategy," he says, "relies on sharing the infrastructure incumbent carriers inherited through more than a century of protected government investment."

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