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February 4, 2003

What's At Stake At the FCC on UNEs: Ensuring Sustainable Competition

NMRC examines whether UNE-P is promoting investment in advanced telecom infrastructure, with papers by Matthew D. Bennett (Alliance for Public Technology), John Malone (Eastern Management Group), Randolph J. May (Progress and Freedom Foundation), Stephen B. Pociask (TeleNomic Research) and Solveig Singleton (Competitive Enterprise Institute).

Excerpts from Press Reports

MEDIA COVERAGE

Communications Daily, February 5, 2003, LINES CONTINUE TO BE DRAWN OVER PENDING TRIENNIAL REVIEW ORDER

...New Millennium Research Council (NMRC) released report Tues. saying UNE-P regime had "heightened and prolonged" severe decline in telecom industry and worked to limit consumer choices, including access to broadband services. Report said FCC should eliminate rules that it said restricted local phone companies from competing with dominant broadband players to stimulate investment in new and advanced networks. It said removing unbundling requirements would encourage construction of alternative networks and provide choice of provider to consumers. It also would spur investment in and deployment of broadband, "enabling more Americans to access advanced telecommunications services." John Malone, CEO of Eastern Management Group and one of 5 authors of report, said UNE-P rule worsened telecom industry slump: "UNE-P didn't bring down the communications market, but like a stroke delivered after a fall down a flight of stairs, it has kept the victim of the floor."

Report said UNE-P was discouraging long-term investing necessary to create competition in broadband. "UNEs are a temporary fix," said Alliance for Public Technology Policy Dir. and co-author of report Matthew Bennett. He said unbundling encouraged rise in competition "in the short term," but did "immeasurable damage to the long-term prospects for deploying advanced services." He said unbundling discouraged network upgrades in urban and suburban areas and led to "practically nonexistent" investment in rural areas. TeleNomic Research Pres. Stephen Pociask said FCC should limit extent of unbundling for services such as broadband and provide "symmetrical regulatory treatment" of broadband investments to encourage broadband investment: "While UNE-P was created to jump-start competition, ironically... it has actually discouraged facilities-based competition."

He said low UNE prices became "subsidy for CLECs paid by their competitors." Report said because of UNE-P, communications and technology industry lost more than 500,000 jobs in last 18 months. --SAP

TR Daily, February 5, 2003, FCC GETS MORE MIXED MESSAGES ON UNEs

Two more groups have weighed in on the FCC's ever-contentious "triennial review" proceeding, with one group bashing the unbundled network element platform (UNE-P) and another endorsing competitive local exchange carriers' views on the application of unbundling mandates to incumbents' new broadband investment.

On the UNE-P front, the New Millennium Research Council today released a report alleging that the use of UNE-P by competitive carriers has "heightened and prolonged" the decline in the telecommunications industry. The FCC could "stimulate investment in new and advanced networks by eliminating rules that restrict local telephone companies from competing with the dominant broadband players," the report says. The report features papers from officials with the Alliance for Public Technology, TeleNomic Research, Eastern Management Group, the Competitive Enterprise Institute, and the Progress & Freedom Foundation.

Meanwhile, CapNet, an association representing software and Internet companies, told the FCC that it should adopt a "procompetitive unbundling policy that will unleash true broadband competition." CapNet sought to counter the idea, first promoted by Verizon Communications, Inc., that the FCC should adopt a "new wires/new rules" approach, under which new broadband investment would be essentially exempt from unbundling requirements. "For broadband competition to thrive, unbundling is essential for last-mile facilities -whether copper, fiber, or hybrid fiber/copper," CapNet wrote in a letter to FCC Chairman Michael K. Powell today. - Brian Hammond, bhammond@tr.com

National Journal's Technology Daily, February 4, 2003

The week before the FCC is set to announce its new rules governing access to telecommunications networks, interested parties have been bombarding the agency with studies, letters and pleadings to persuade the FCC to adopt rules they favor. The New Millennium Research Council issued a report Tuesday complaining that the current rules granting competitors of the regional Bell companies access to Bell networks on an "unbundled" basis at regulated prices contributed to the downturn in the telecom sector. Also on Tuesday, CapNet, a technology industry lobbying group for the Washington region, sent a letter urging FCC commissioners to adopt "pro-competition" policies. The group also argued that following a path of deregulation as outlined by the Bells would lead to further financial trouble in the sector. On Monday, the Information Technology Association of America sent a similar letter, urging the FCC to preserve its current rules.

TechWeb News, February 4, 2003 REPORT: REGULATORS ARE PROLONGING TELECOM DOWNTURN

The federal pricing model related to local telephone companies opening up their networks to long-distance companies and high-speed Internet providers is prolonging the downturn in the telecommunications industry, a report released Tuesday said.

The so-called unbundled network elements platform, or UNE-P, gives companies quick access to consumers in a local market at the expense of long-term competition, the report issued by the New Millennium Research Council said.

"The Federal Communications Commission can stimulate investment in new and advanced networks by eliminating rules that restrict local phone companies from competing with the dominant broadband players," the report said. "Removing unbundling requirements and encouraging competition will encourage the construction of alternative networks so that consumers can have a real choice of provider."

A requirement of the Telecommunications Act of 1996, UNE requires local telephone companies to allow other companies access to their networks. The NMRC report comprises the opinions of five experts in telecommunication regulation.

Phone Plus Magazine, February 4, 2003 Academics, Researchers Say UNE-P Prolonging Telecom Crisis

Four telecom experts said Tuesday local telephone regulations have stymied innovation, discouraged investment, created an artificial competitive model and "prolonged" an unprecedented meltdown in a sector that Wall Street now shuns.

In a report the New Millennium Research Council issued today, five academics and researchers called on the FCC to scrap many of the unbundled network element - platform (UNE-P) rules that allow AT&T Corp., MCI and smaller companies to resell local phone service over the Bell networks at rates state regulators set based on a forward-looking cost model. Some experts also supported the elimination of line-sharing requirements tailored for broadband providers.

The FCC is scheduled to issue new rules by Feb. 20.

Matthew Bennett, policy director of the Alliance for Public Technology, said today the unbundling requirements have not furthered the goals of competition set forth in the Telecommunications Act of 1996.

"We feel [the] unbundling regime has not contributed to any of these goals," he said.

John Malone, president and CEO of the Eastern Management Group, said the resale platform has "kept telecom investors sidelined."

He also said it is more feasible today to invest in switches because the cost of network gear has dropped so substantially.

"People can afford to buy these facilities when they get access to money," he said.

As part of its highly anticipated Triennial Review, the FCC is charged with determining under which circumstances companies competing with the incumbent carriers would be "impaired" to otherwise offer the same service without access to the unbundled network elements (UNEs).

In Section 251 of the 1996 Telecom Act, Congress established unbundling and resale obligations requiring incumbent phone providers to lease pieces of their network to rivals.

But Malone said the FCC created UNE-P. "Congress did not invent UNE-P," he said. "UNE-P is a concoction of the FCC's own making."

Randolph May, senior fellow and director of communications policy studies at the Progress & Freedom Foundation, said the U.S. Supreme Court and D.C. Circuit Court of Appeals found that the FCC's UNE rules were "too expansive" and "not consistent with the Congressional intent."

The long-standing debate over what constitutes impairment has never been resolved. The FCC is expected to decide on this key issue within the next three weeks, though it is uncertain what role the federal agency will give state regulators in determining the level of impairment in specific markets.

The report issued today, entitled "What's at Stake at the FCC on UNEs: Ensuring Sustainable Competition," features papers from Bennett; Malone; May; Stephen B. Pociask, president of TeleNomic Research LLC; and Solveig Singleton, senior policy analyst at the Competitive Enterprise Institute.

Light Reading, February 5, 2003, NMRC Says UNE-P Should Go

WASHINGTON -- The pricing model know as UNE-P (Unbundled Network Elements Platform) being reviewed at the Federal Communications Commission has "heightened and prolonged" the severe decline in the telecommunications industry and works to limit consumer choices, including access to broadband services, according to five experts stating their view in a report issued today by the New Millennium Research Council (NMRC).

The report, entitled "What's at Stake at the FCC on UNEs: Ensuring Sustainable Competition," features papers from the following academics and industry researchers: Alliance for Public Technology Policy Director Matthew D. Bennett; TeleNomic Research President Stephen B. Pociask; Eastern Management Group President and CEO John Malone; Competitive Enterprise Institute Senior Policy Analyst Solveig Singleton; and Progress & Freedom Foundation (PFF) Senior Fellow and Director of Communications Policy Studies Randolph J. May.

The NMRC report notes: "The downturn in the telecommunications industry has been heightened and prolonged by regulation that favors quick entry over sustainable, long-term competition. The FCC can stimulate investment in new and advanced networks, by eliminating rules that restrict local phone companies from competing with the dominant broadband players. Removing unbundling requirements and encouraging competition will encourage the construction of alternative networks so that consumers can have a real choice of provider. This action will also spur investment in and deployment of broadband, enabling more Americans to access advanced telecommunications services." VIEWS OF THE EXPERTS

The five experts in the NMRC report examine whether or not the current regulatory pricing model known as UNE-P is promoting investment in advanced telecommunications infrastructure. Among the major conclusions of the contributors are the following:

The telecommunications industry slump has been worsened by the UNE-P rule. John Malone, president and CEO of Eastern Management Group writes: "UNE-P didn't bring down the communications market, but like a stroke delivered after a fall down a flight of stairs, it has kept the victim on the floor."
UNE-P is discouraging the long-term investing needed to create more consumer choices for services such as broadband. Matthew D. Bennett, policy director of the Alliance for Public Technology notes: "UNEs are a temporary fix. In the short term, unbundling has encouraged a rise in competition statistics, but it has done immeasurable damage to the long-term prospects for deploying advanced services. It has discouraged network upgrades (for broadband and other services) in urban and suburban areas and led to practically non-existent investment in rural and underserved communities." Stephen B. Pociask, president of TeleNomic Research, notes: "Changes limiting the extent of unbundling for high-speed Internet services, as well as rules that provide symmetrical regulatory treatment of broadband investments, would bring relief to broadband investors."
Pociask concludes: "While UNE-P was created to jumpstart competition, ironically ... it has actually discouraged facilities-based competition. The fact is that UNE prices are being set so low they have effectively become a subsidy for CLECs paid by their competitors, the ILECs." Randolph J. May, senior fellow and director of Communications Policy Studies at Progress & Freedom Foundation, notes: "For if the Commission chooses [Static Regulated Competition] embodying an indefinite future of 'managed competition,' investment in advanced telecommunications facilities and equipment and innovative new services will be impaired."

UNE-P is costing America quality, good-paying jobs. Without a fair return on investment, it becomes increasingly difficult to maintain current workforce levels. In the past 18 months alone, the communications and information technology industry has lost more than 500,000 jobs. As May writes: "This stifling of investment obviously will have a continuing adverse impact on jobs in the already depressed telecom and high-tech sectors and thus on the overall economy." According to an earlier NMRC study of February 25, 2002, full broadband deployment would result in the creation of 1.2 million new jobs. Information technology jobs also pay, on average, 85 percent more than other jobs.

The preceding is a partial list of the key conclusions in the NMRC report. For the full text of each expert's submission and credentials, go to http://www.newmillenniumresearch.org on the Web.