The FCC's Triennial Review Remand Order

The following is the summary from the FCC’s Order on Remand FCC 04-290 (the “Order”) of its Triennial Review Order rulemaking proceeding which was released on Friday, Feb. 4, 2005. In reaching these findings, the FCC evaluated impairment in the context of a “reasonably efficient competitor.” Moreover, it prohibited the use of unbundled network elements (UNEs) for wireless and long distance services, drew inferences for one market from the state of competition in “other, similar markets” and found inappropriate a general rule prohibiting access to UNEs whenever a requesting carrier is able to use an incumbent local exchange carrier’s (LEC’s) tariffed offering.

Dedicated interoffice transport

The FCC found that “[c]ompeting carriers are impaired without access to DS1 transport except on routes connecting a pair of wire centers, where both wire centers contain at least four fiber-based collocators or at least 38,000 business access lines. Competing carriers are impaired without access to DS3 or dark fiber transport except on routes connecting a pair of wire centers, each of which contains at least three fiber-based collocators or at least 24,000 business lines. Finally, competing carriers are not impaired without access to entrance facilities connecting an incumbent LEC’s network with a competitive LEC’s network in any instance.” The FCC adopted “a 12-month plan for competing carriers to transition away from use of DS1- and DS3-capacity dedicated transport where they are not impaired, and an 18-month plan to govern transitions away from dark fiber transport. These transition plans apply only to the embedded customer base, and do not permit competitive LECs to add new dedicated transport UNEs in the absence of impairment. During the transition periods, competitive carriers will retain access to unbundled dedicated transport at a rate equal to the higher of (1) 115 percent of the rate the requesting carrier paid for the transport element on June 15, 2004, or (2) 115 percent of the rate the state commission has established or establishes, if any, between June 16, 2004 and the effective date of this Order.”

The Order established limits for DS1 and DS3 transport. On routes where the FCC determines that there is no unbundling obligation for DS3 transport, but where there is impairment for DS1 transport, each carrier may obtain 10 DS1 transport circuits on that route. On those routes where the FCC finds impairment for DS3s, each carrier can obtain up to 12 DS3s.

High-capacity loops

The FCC found that “[c]ompetitive LECs are impaired without access to DS3-capacity loops except in any building within the service area of a wire center containing 38,000 or more business lines and four or more fiber-based collocators. Competitive LECs are impaired without access to DS1-capacity loops except in any building within the service area of a wire center containing 60,000 or more business lines and four or more fiber-based collocators. Competitive LECs are not impaired without access to dark fiber loops in any instance.” The FCC adopted the same transition plan for high-capacity loops that it adopted for dedicated interoffice transport as described above.

The Order limited the number of unbundled high-capacity loops that a competitive LEC can obtain to one DS3 loop and 10 DS1 loops per building.

Mass market local circuit switching (UNE-P)

The FCC found that “[i]ncumbent LECs have no obligation to provide competitive LECs with unbundled access to mass market local circuit switching” (used for the UNE platform, i.e. the combination of an unbundled loop, unbundled local circuit switching, and shared transport). The FCC also adopted “a 12-month plan for competing carriers to transition away from use of unbundled mass market local circuit switching.” This transition plan “applies only to the embedded customer base, and does not permit competitive LECs to add new switching UNEs.” During the transition period, competitive LECs “will retain access to the UNE platform at a rate equal to the higher of (1) the rate at which the requesting carrier leased that combination of elements on June 15, 2004, plus one dollar, or (2) the rate the state public utility commission establishes, if any, between June 16, 2004, and the effective date of this Order, for this combination of elements, plus one dollar.”

Implementation issues

Recognizing that the new rules governing access to dedicated transport and high-capacity loops evaluate impairment based upon objective and readily obtainable facts, such as the number of business lines or the number of facilities-based competitors in a particular market, the FCC required a carrier submitting an order to obtain a high-capacity loop or transport UNE “must undertake a reasonably diligent inquiry and, based on that inquiry, self-certify that, to the best of its knowledge, its request is consistent with the requirements...and that it is therefore entitled to unbundled access to the particular network elements sought.” The incumbent LEC “must immediately process” the request. To challenge any such UNEs, an incumbent LEC subsequently can raise that issue through the dispute resolution procedures provided for in its interconnection agreements: “In other words, the incumbent LEC must provision the UNE and subsequently bring any dispute regarding access to that UNE before a state commission or other appropriate authority.”

Effective date of rules

Citing a need for prompt action, the FCC made the new rules effective on March 11, 2005, rather than 30 days after publication in the Federal Register. The FCC took that action to prevent a gap between the expiration of the interim unbundling requirements and the effective date of the new rules, during which the previously adopted transitional requirements would be effective for a short period.

Dissenting statements

Commissioner Copps said the Order “effectively dismantles wireline competition. Brick by brick, this process has been underway for some time. But today’s Order accomplishes the same feat with all the grace and finality of a wrecking ball.” He continued, stating that “[a]fter having abandoned residential competition earlier, today the majority also hangs up on small business consumers.”

Commissioner Adelstein noted that “[a]s the majority now seeks to bury burgeoning telecom competition six feet under, the only choice I was given was where to pound in the nails.” He found that the record “overwhelming[ly] demonstrates that competitors need access to critical bottleneck elements from the incumbents’ legacy networks in order to connect their networks to their customers. Yet, today the Commission denies access to those elements with an overbroad decision that is divorced from the requirements of the statute, the direction of the courts, the evidence in this record, and the realities of providing telephone service.” Commissioner Adelstein was particularly critical of the Commission’s treatment of local loops.

In short, the Order contains no surprises. Although we are continuing to analyze the order and its effect on the industry, please call us with any questions, comments or thoughts.