On August 7, 2015, the FCC released a Report and Order, Order on Reconsideration and Further Notice of Proposed Rulemaking in Docket 13-5, its “Technology Transitions” Proceeding.  

The Order finally addresses, at least on an interim basis, CLEC concerns about the availability of wholesale services during the industry transition from a Time Division Multiplexed (TDM) network to a network using Internet Protocol (IP). It also provides protection for consumers as copper is retired and/or services are discontinued during this transition. Here are the key points: 

Consumer Protections:

• Copper Retirement – The Commission reaffirms its decision not to create an approval requirement for retirement of legacy facilities so long as the change of technology does not discontinue, reduce, or impair the services provided — ensuring that LECs can continue to transition to an all-fiber environment. However, because its current network change rules do not take account of the needs of consumers for accurate information about the consequences of retirements of copper facilities, the Commission simply requires that ILECs must provide notice of planned copper retirements to retail customers when such retirements remove copper to the customers’ premises, along with particular consumer protection measures.
• Service Discontinuance - Section 214 of the Communications Act, requires carriers to obtain the FCC’s approval before they discontinue, reduce, or impair service to a community or part of a community. This process allows the Commission to meet its obligation under the Act to protect the public interest and to minimize harm to consumers.

Preserving Wholesale Competition - Specifically, the Commission implements revisions to its copper retirement and service discontinuance rules to ensure that:

• CLECs are adequately informed about technology changes that impact them - The Commission updates the process by which ILECs notify interconnecting entities of planned copper retirements. It now requires ILECs to provide at least six months’ advance notice of proposed copper retirements to interconnecting carriers in order to provide such carriers adequate time to prepare their networks for the changes.
• The interests of end users impacted by changes in service by providers of wholesale inputs are adequately recognized as important to the service discontinuance process – The Commission clarifies that a carrier must obtain its approval before discontinuing, reducing, or impairing a service used as a wholesale input, but only when the carrier’s actions will discontinue, reduce, or impair service to end users, including a carrier-customer’s retail end users.
• CLECs do not lose the access that they need to continue to provide the benefits of competition – The Commission develops interim rules for wholesale competition to be in effect until its special access investigation is complete and new rules are implemented.  It concludes that to receive authority to discontinue, reduce, or impair a legacy TDM-based service that is used as a wholesale input by CLECs, an ILEC must as a condition to obtaining discontinuance authority commit to providing CLECs wholesale access on reasonably comparable rates, terms, and conditions — but only until the Commission: (1) identifies a set of rules and/or policies that will ensure rates, terms, and conditions for special access services are just and reasonable; (2) provides notice such rules are effective in the Federal Register; and (3) such rules and/or policies become effective. 
  
  The Commission will evaluate compliance with this “reasonably comparable wholesale access” requirement based on the totality of the circumstances and articulate questions that will guide its inquiry. The interim reasonably comparable wholesale access condition applies to two categories of service: (1) special access services at DS1 speed and above; and (2) commercial wholesale platform services such as AT&T’s Local Service Complete and Verizon’s Wholesale Advantage. These services allow CLECs to purchase unbundled voice loops, switching and transport in one package to offer service to enterprise customers.
  
  In evaluating whether the reasonably comparable wholesale access requirement is fulfilled, the Commission will consider the following questions:
  
  Will Price per Mbps Increase - Will the price per Mbps of the IP replacement product exceed the price per Mbps of the TDM product that otherwise would have been used to provide comparable special access service at 50 Mbps or below?
  
  Will A Provider’s Wholesale Rates Exceed Its Retail Rates - Will an ILEC’s wholesale charges for the replacement product exceed its retail rates for the corresponding offering?
  
  Will Reasonably Comparable Basic Wholesale Voice and Data Services Be Available - Will the price (net of any and all discounts) of wholesale voice service purchased under a commercial wholesale platform service be higher than the price of the existing TDM wholesale voice service it replaces, and the price (net of any and all discounts) for the lowest capacity level of special access service at or above the capacity of a DS1 increase?
  
  Will Bandwidth Options Be Reduced - Will wholesale bandwidth options include the same services retail business service customers receive from the ILEC?
  
  Will Service Delivery or Quality Be Impaired - Will service functionality and quality, OSS efficiency, and other elements affecting service quality be equivalent or superior compared to what is provided for TDM inputs today? Will installation intervals and other elements affecting service delivery be equivalent or superior compared to what the incumbent delivers for its own or its affiliates’ operations?

The Commission also notes that while it encourages ILECs to sell to competitors their facilities that would otherwise be retired, it will not involve itself in the process.

In its Order on Reconsideration - the Commission denies USTelecom’s Petition for Reconsideration of the Declaratory Ruling it adopted in November 2014, which concluded that the term “service” in section 214(a) is defined functionally as used by the community and not solely with reference to a carrier’s tariffs.

Finally, the Commission seeks to establish specific criteria it will use to evaluate section 214 discontinuance applications. Specifically:

In its Further Notice of Proposed Rulemaking - Having established that section 214’s discontinuance provisions apply to a service based on a totality-of the-circumstances functional evaluation, the Commission believes it is important to provide additional guidance so that consumers and providers are clear on the meaning of the section 214 standard. Thus it seeks industry comments regarding specific criteria it proposes to use in evaluating applications to discontinue retail services pursuant to section 214. Comments are due 30 days after the order is published in the Federal Register.

While CLECs will be largely satisfied by the FCC’s actions, there are many aspects that ILECs will find extremely disappointing. These include the fact that reasonably comparable replacement services for commercial wholesale platform service must be made available. Since these services were largely offered to help CLECs transition to their own networks when the Unbundled Network Element Platform (UNE-P) was rejected by the courts, it is ironic that they must continue into the Internet age.  

In addition, the Commission’s refusal to mandate a certain sunset period for the reasonably comparable wholesale service requirement must be infuriating to ILECs. After all, the special access proceeding started ten years ago and the end is not close to being in sight. Thus, ILECs have a legitimate concern that they will have to continue offering copper services far into the future.

There are also concerns about increased government intrusiveness. Based on my initial read, it appears that every time an ILEC chooses to discontinue a service it could face an extensive Commission review.  Similar to its actions in the Open Internet proceeding, the FCC apparently believes it can involve itself in every service discontinuance request on a case-by-case basis. Moreover, since Title II services are involved, the Commission can use its section 201 and 202 authority to mandate specific prices of IP replacement services anytime it chooses. Thus, ILECs have a lot to ponder from this Order.  

We will have a lot more to say about this Order next time.

By Andy Regitsky, CCMI