The FCC has finally responded to years of CLEC lobbying!  Earlier this week FCC Chairman Tom Wheeler indicated that the Commission on August 6, will adopt an order requiring ILECs to make “reasonably comparable” wholesale services available to CLECs as they replace their copper networks with fiber-based Internet protocol (IP) networks. These new rules will be in place on an interim basis until the Commission completes its ongoing investigation into ILEC special access services.

The Commission acknowledged the need for IP-based wholesale services in December of 2014 when it released a Notice of Proposed Rulemaking (NPRM) in Docket 14-174. This was recognition of the obvious fact that CLECs continue to serve a high percentage of their business customers by purchasing special access circuits or unbundled high capacity loops from ILECs. This is certainly true for the “last mile” connection between the CLEC and the end user customer since it is clearly uneconomical for a CLEC to build out to every customer location and this situation will not change for the foreseeable future.

CLECs will also continue to utilize ILEC copper facilities to provide services to small and medium size business customers. For example, many CLECs purchase off-tariff Ethernet services to ride over ILEC copper facilities (EoC) to reach their customers. These services are increasingly threatened as ILECs replace more of their copper with fiber.  

In recognition of the seriousness of the need for IP wholesale services, the FCC is currently circulating draft rules to be voted on at its August meeting. In the meantime, Commissioner Wheeler has released a “Fact Sheet” which provides a good summary for what we should expect when the Commission releases its order in August or September:

Preserve Competitive Choices - Competitive providers often combine their own facilities with the last-mile services of incumbent providers to reach small and medium-sized businesses and institutions, including schools, libraries, health care facilities, and government offices. However, competitive carriers and the customers that depend on them face uncertainty as incumbent carriers prepare to stop offering some of these services. To preserve competition in the enterprise market, the draft rules being circulated by the Chairman would:

1. Require that replacement services be offered to competitive providers at rates, terms and conditions that are reasonably comparable to those of the legacy services. This would be an interim measure, pending the completion of the FCC’s special access proceeding which is examining these issues more broadly.

2. Clarify that a carrier that plans to discontinue a service that has only carrier customers must still follow the statutory process for discontinuance if the action would negatively impact retail users served by those carrier customers. While a carrier’s discontinuation of a wholesale service may not always discontinue service to retail end users, the carrier still must undertake a meaningful evaluation to determine whether the statutory discontinuance process is triggered. 

The Fact Sheet also indicated that the Commission would adopt rules to protect consumers and businesses, including ones utilizing CLECs, as ILEC copper networks are replaced by fiber. The rules would:

1. Require that consumers be notified of plans to retire copper networks. Notice would be required approximately six months in advance for non-residential customers and three months in advance for residential customers.

2. Define “retirement” in such a way to prevent retirement of networks by neglect (sometimes referred to as “de facto” retirement).

3. Require notice to interconnecting carriers for retirement of all parts of the copper network that are critical to providing their customers with service.

4. Retain carrier flexibility to retire copper networks in favor of newer facilities without prior Commission approval – as long as no service is discontinued, reduced, or impaired.

The Commission’s willingness to finally address growing CLEC wholesale service concerns, is of course, very welcome. However, there are two potential problems. 

First is the requirement that ILECs provide “reasonably comparable services.” Unless the FCC specifically defines this term, and provides the specific criteria for what makes a new service reasonably comparable to a current service, you can be sure that there will be constant industry disputes about almost every replacement service.

Second, it is worrisome that the Commission’s rules are only temporary measures pending the completion of its special access investigation. Does the Commission actually believe that CLECs can replace special access with their own facilities and not need fiber-based replacement services such as Ethernet? 

It is hard to imagine that the Commission could reach such a conclusion since, as noted above; CLECs will never find it economical to build ubiquitous networks regardless of whether those networks are copper or fiber. Nevertheless, the Commission’s assertion that reasonably comparable IP wholesale service replacements may be only temporary should focus CLEC eyes on the special access investigation in Docket 05-25. Industry comments are now due in that proceeding in September. It might be very wise for CLECs to participate.

By Andy Regitsky, CCMI