Fighting Incumbents in an Election Year

While Competitive Local Exchange Carriers (CLECs) such as Covad and Rhythms fight legal battles just to do business, incumbents (ILECs) such as SBC spend billions to change the shape of their networks to render written laws useless, and government agencies require 270 days to act.

The time to stop a revolution is at the beginning, not the end. —Adlai Stevenson (1900-1965)

by Patricia Fusco
of internetnews.com
[June 6, 2000]

The Law's Already Broken!
The House Commerce Committee introduced legislation on May 15th that would end reciprocal compensation payments to Competitive Local Exchange Carrier's for termination of Internet traffic. Considered a revolution by some, the Committee's action is akin to a legislative legalization of incumbent's attempts to circumvent the law.

The Reciprocal Compensation Adjustment Act of 2000 [HR 4445] would amend the Communications Act of 1934 to provide that "no local exchange carrier shall be required to make any payment for the transport or termination of telecommunications to the Internet or any provider of Internet access service."

It also specifies that such traffic is Interstate in nature and subject to FCC control rather than that of state utility commissions.

The bill was introduced by Rep. Billy Tauzin (R-LA) and co-sponsored by Tom Bliley (R-VA), John Dingell (D-MI), and Rick Boucher (D-VA), as well as 196 other representatives who probably did not know what they were signing when Tauzin's team asked them to join.

The "deregulatory" mood is high on Capitol Hill as it's an election year and telecom monies are an irresistible lure for dwindling campaign reserves.

Rhetoric aside, Bell Atlantic utilized the Federal Communications Commission's declaration that Internet traffic is Interstate in nature to strike down reciprocal compensation in Massachusetts in last year. CLECs had to read the writing on the regulatory wall that reciprocal compensation was on life-support, if not dead.

Originally, reciprocal compensation was the brainchild of the former Bell companies. It was a painfully expensive miscalculation on their part as it was designed to a reap monies for voice traffic carriers at the expense of CLECs and ISPs. With the advent of the Internet and data traffic growth, reciprocal compensation became just the opposite; a financial anchor fastened around the central office bottlenecks of the "Baby Bells."

Frank Paganelli, Rhythms assistant general counsel, said it's not wasting its time trying to fend off the federal attack on reciprocal compensation.

"Rhythms' business model was not built on reciprocal compensation payments," Paganelli said. "We're data-centric and while there are bills that deregulate long distance incumbent services as well as terminate reciprocal compensation, we've simply argued that a bit, is a bit, is a bit; whether its voice or data."

Peddling Influences on Broadband
Influencing federal regulators and legislators is nothing new for the entrenched duopoly orchestrated by cable and telecom leviathans in the U.S.

But Paganelli said duking it out in D.C. is only part of the data CELC's battle. Paganelli said it and other CLECs may be losing the tug-of-war on Capitol Hill, but its winning a few rounds in state Public Utility Commissions and with the FCC.

"Most of the recent telecom activity on Capitol Hill consists of efforts to re-write the 1996 Telecom Act," Paganelli said. "While ILEC's want to remove FCC authority from the Telecom Act and break free from unbundling and reselling requirements in Sections 251 and 252, Rhythms is arguing that the act is working well to promote competition. We say don't gut the law, and broadband services will reach more Americans, faster."

Line Sharing
Because the brunt of the FCC's line sharing order in November 1999 is due to be realized in June 2000, execution of the competition-fostering order has been hotly contested across the nation.

Jason Oxman, Covad senior counsel, said its line sharing with incumbents has been going well, with a few exceptions.

"The good news is that not all of the ILECs are resorting to delay tactics," Oxman said. "Bell Atlantic, US WEST, and Bell South have all negotiated in good faith to provide access to their networks."

"We remain confident that obstinate ILECs operated by the subsidiaries of SBC will abide and comply with the FCC's line sharing order without enforcement by the Commission and state PUCs," Oxman said.

Real Line Sharing
"We want to cut the local loop installation process down to size," Paganelli said. "We're going to make it a matter of days, not weeks. We're ramping up back office systems to fulfill the promise of line sharing with no human touche, wholly automating the ordering process from beginning to end."

Rhythms has filed with Covad Communications, Inc. in 10 states against the principal ILECs to enforce the interconnection agreements in to the FCC's line sharing order. In regional skirmishes, the CLECs are winning key decisions across the U.S.

In May, Covad was awarded $27.2 million plus attorneys' fees by the American Arbitration Association in its suit against Pacific Bell for violations of the Telecommunications Act of 1996. In November 1998, the arbitrators determined that Pacific Bell had violated the Telecom Act as well as its contract with Covad by failing to timely deliver collocation space and operable loops.

Paganelli said the timeline for PUC action was not necessarily Internet-friendly, but that the line-sharing clock is ticking and ILECs are scrambling to comply with the FCC order.

"A PUC's timeline to act starts with 270 days of negotiations," Paganelli said. "The line-sharing clock is ticking, so we're busy negotiating with ILECs now. Like Covad, we're trying to negotiate zero-dollar temporary price agreements to be trued-up with states after a new pricing model is established. All the line sharing deals are on an interim basis."

FCC Enforcement, and a Way Around It
Rhythms' second regulatory wrangling is with the FCC Unbundled Network Elements order that the data CLEC hopes will unleash an entirely new economy of scale for broadband digital subscriber line (DSL) services.

Commonly known as the UNE Remand, the FCC order allows CLECs to access ILEC loops necessary to transport and aggregate traffic on a city wide basis while tapping into the operations support systems necessary to order and provision the UNE on a routine, scalable basis. The FCC also established that national rules — not state or local rules — would apply to the definition of UNE, which built-in consistency and predictability to establish relationships between competitive and incumbent carriers.

The FCC added several important new UNE requirements including sub-loop unbundling. The move allows Rhythms and other CLECs to serve customers it could not reach before. Furthermore, by giving competitive carriers additional flexibility in how they interconnect with the incumbent phone companies, the new rules allow Rhythms to reach customers served by a broader range of loop technologies, such as DLC and remote concentrators.

The FCC Order also clears the way for CLECs to get all the information they need to deploy new technologies like Voice-over-DSL (VoDSL). Finally, the order allows CLECs to use dark fiber, or unused fiber optic capacity, to serve customers as well as to complete their own networks.

Before the order, a CLEC would have to accept whatever services the ILEC decided to carry. Because the order further splits the top half of a copper loop, the local carriers can now determine what services they want to provide over the bandwidth.

Paganelli said the next step in UNE line sharing would impact Rhythms' services toward the end of the year and change its economic scale for network operations.

"Right now, a copper loop is split so that ILECs carry baseband, plain-old-telephone services over the bottom of the wire, while DSL access is provided over the top half of the loop," Paganellia said. "With the UNE Remand sub-loop unbundling provision, a CLEC goes virtual on the top half of the loop. A customer may dial in to AT&T, but it may be Bell Atlantic equipment that actually transports the voice or data through its switches."

"The top of the wire is currently carrying DSL, but that's about to change due to the FCC order. By the end of the year we will be able to add VoDSL to the top of the wire. Originally charged at a premium T1 price, we're getting the bandwidth for nearly nothing, which will unleash a new competitive force in broadband communications," Paganelli explained.

That does not mean that ILECs are making it easy for CLECs to compete with broadband services. Carriers like SBC Communications, Inc. are fighting the FCC's orders tooth and nail. While losing anti-competitive attempts in Washington D.C., SBC has found a way around the current regulations.

Project Pronto = Broadband Delay
SBC's "Project Pronto" may be promoted as a $6 billion broadband initiative, but it also enables SBC's five subsidiaries to circumvent current regulatory orders because the buildout uses Remote Terminal Access facilities away from Central Offices where CLECs collocate with incumbents.

While companies like Rhythms, Covad, and NorthPoint are authorized to set up collocation at the incumbent's CO, they cannot tap into the RTA facility though SBC's DSLAMs.

It's an impossible situation because SBC is laying fiber from its RTA facilities back to its CO. DSL is designed to go through copper lines, not fiber. So data CLECs providing DSL services must collocate with the DSLAM at the RTA facility. At this time, there is no FCC order on the books that directs incumbents like SBC to share these remote facilities.

Paganelli said Rhythms' has proposed new rulemaking with the FCC to overcome SBCs technological barrier to providing quality DSL connectivity, but as long as there is no waiver in place for provisioning access to RTA facilities, the ILEC is capable of suffocating neonate broadband competition in its cradle.

"SBC is establishing a closed architecture on its network as it builds-out remote terminals to deploy its proprietary DSL services and block competition out of its facilities," Paganelli said. "DSL does not work well over fiber. Enter SBC's Project Pronto. Rhythms needs access to the DSLAM which is being removed to remote access."

"We've petitioned the FCC for a waiver to grant Rhythms' conditional access to SBC RTAs, but the petition is still open," Paganelli added.

While SBC attempts to relegate competitive broadband services to an early crib death, Paganelli said the final barrier to providing high-quality, competitive DSL access is due in part to DSLAM equipment manufacturers. CLECs that need to collocate with DSLAMs through line cards need plug-and-play capabilities, which remain an elusive feature not provided by current DSLAM manufacturers, such as Copper Mountain, Paradyne, and Alcatel.

"If everyone made different sized light bulbs we would not light up our homes at night," Paganelli said. "In order to effectively collocate at incumbent's DSLAMs we need a plug-and-play open architecture standard from equipment manufacturers. Only then will the full power of quickly provisioned broadband services be realized."

DSL Evolution, Not Revolution
The FCC is effectively oiling the bureaucratic machine to keep competitive forces coursing through broadband deployment nationwide. But it's companies like Rhythms initiating stateside actions, and Covad contesting issues in courtrooms, and NorthPoint's alliance building, that are bringing high-speed services home to ISPs.

While incumbents maneuver to stop the competitive DSL revolution at its beginning, Covad and Rhythms are determined to join them before the end of the line.

Related Links:
The Reciprocal Compensation Adjustment Act of 2000 [HR 4445]
http://thomas.loc.gov/cgi-bin/query/C?c106:./temp/~c106YrvRgn

http://www.house.gov/tauzin/

http://www.house.gov/bliley/

http://www.house.gov/dingell/

http://www.house.gov/boucher/

http://www.bellatlantic.com/

http://www.fcc.gov/

http://www.rhythms.com/

Telecommunications Act of 1996
http://www.fcc.gov/telecom.html

http://www.covad.com/

American Abitration Assoc.
http://www.adr.org/

http://www.pacbell.com/

http://www.sbc.com/

Project Pronto
http://www.sbc.com/Technology/data_strategy/project_pronto/Home.html

http://www.northpointcom.com/

http://www.coppermountain.com/

http://www.paradyne.com/

http://www.alcatel.com/

—End