The FCC has finally responded to months of CLEC lobbying! On November 25, 2014, the Commission released a Notice of Proposed Rulemaking (NPRM) in new Docket 14-174 addressing CLEC concerns about the availability of wholesale services during the transition from the Time Division Multiplexed (TDM) network to a network using Internet Protocol (IP). Industry comments are due 30 days after the NPRM appears in the Federal Register. And while the NPRM is a good first step to addressing the wholesale service availability issue, as we discuss below, there is still a huge amount of uncertainty facing the industry. 

Even as we approach 2015, CLECs still serve a large number of their business customers by purchasing special access circuits or unbundled high capacity loops from ILECs. This is especially true for the “last mile” connection between the CLEC and the end user since it is simply uneconomical to build to every customer location. This is not going to change for the foreseeable future (See our September 5, 2014 blog for more details about CLEC concerns). 

CLECs also continue to utilize ILEC copper facilities to provide services to small and medium size business customers. For example, certain 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. Thus, CLECs have been concerned for months that they are going to be put into the position where they have to win and maintain customers when they have no idea if the last mile wholesale ILEC services they rely on are going to be available. To address these competitive concerns, the Commission tentatively concluded in the NPRM that it should take two major actions:

1. ILEC Copper Retirement – The Commission does not propose any change to the current rule that an ILEC has the right to cease operating its copper network without FCC approval. However, the Commission believes it is important that copper retirement—particularly retirement on a wide scale— includes adequate notice to all customers of the ILEC’s network, including CLECs. Accordingly, in the NPRM the Commission first defines copper retirement as the removing or disabling of copper loops, subloops and the feeder portion of the loop.

   Second, the Commission proposes that ILECs must provide interconnecting competitors a description of the expected impact of their planned changes, including but limited to any changes in prices, terms and conditions in services that will be affected by the planned changes. ILECs must provide direct notification to interconnecting competitors and must file a certificate of service to the Commission confirming this has been done. 

   Finally, the Commission seeks comments on proposals by AT&T and other parties to facilitate the sale or auction of copper facilities that an ILEC intends to retire.

2. Availability of Wholesale Services – The Commission intends to use its special access investigation to conduct a comprehensive evaluation of access to last-mile services, which it believes will enable it to address critical long-term questions about the state of competition and the role of regulation in facilitating competitive markets. In the meantime, however, it needs to ensure that no harm is done to competition in the interim. As ILECs turn off legacy services, CLECs face the prospect of having no access to critical inputs, at least not on reasonable terms and conditions—preventing them from continuing to provide competitive alternatives to small- and medium-sized businesses and other institutions like schools, libraries, and health care facilities. The Commission therefore tentatively concludes that to receive authority to discontinue, reduce, or impair a legacy service that is used as a wholesale input by CLECs, an ILEC must commit to providing CLECs equivalent wholesale access on equivalent rates, terms, and conditions.

There is one additional action the Commission took in Docket 14-174. It released a Declaratory Ruling indicating that when it reviews ILEC section 214 applications to discontinue service offerings it will not define the service to be discontinued based on its tariff definition. Instead, the Commission will take into account the “totality of the circumstances from the prospective community or part of a community.”  For example, since end users in a geographic area could use their copper wireline service to connect to fax machines or medical alarms, it could be difficult for an ILEC to ever obtain section 214 approval to discontinue its wireline voice service in that particular area. Theoretically an ILEC could be forced to offer copper wireline voice service in perpetuity, since the community it serves could always claim that only the current service and not the replacement service meets its needs. This seems to make no sense.

In sum, the Commission has belatedly, but finally, began a proceeding to protect wholesale competition as ILECs networks evolve. However, unless the Commission specifically defines the parameters of the “equivalent” wholesale service ILECs are required to make available to replace special access, there is going to be a lot of confusion and unhappiness in the industry, especially when non-tariff services such as Ethernet are compared to tariffed special access services.

In addition, the Declaratory Ruling basing discontinuance of a service on a nebulous “community” standard means that ILECs may have to seek legal recourse as protection from offering complementary copper and fiber networks forever.

By Andrew Regitsky, CCMI

Join us for a free, 60-minute webinar, The IP Transition and the Wholesale Market, on Tuesday, Dec. 9th at 2 PM EST. Make sure you know the ins and outs of the FCC Order and what it means to your network and your margins.