While the bitter battle over Internet regulation commands all the media attention, there is another important industry dispute that is intensifying well beneath the public’s radar. That is the battle between ILECs and CLECs regarding the federal regulations that will guide the industry transition to fiber networks using Internet protocol (IP). 

Simply put, ILECs believe that their interconnection and unbundled network element (UNE) obligations codified in the 1996 Telecommunications Act in section 251 do not apply to their new IP networks.  Conversely, CLECs assert that, not only do these ILEC requirements apply to IP, the FCC must also ensure that ILECs provide wholesale services that are functionally equivalent service to the time division multiplexed (TDM) services such as special access that are being phased out.     

The latest skirmish in this battle occurred on February 5^th, when the industry filed comments in two related proceedings - Docket 14-174, the “Technology Transitions” Notice of Proposed Rulemaking (NPRM), and Docket 15-1, the Windstream “Petition for Declaratory Ruling,” requesting the FCC to require ILECs to continue to provide unbundled DS1 and DS3 loops in their fiber networks. 

Here are the specific arguments made by ILEC and CLECs in their comments regarding two of the most important technology transition issues:

1. The Need for ILEC Wholesale Equivalent IP Services

In its November 25, 2014 NPRM in Docket 14-174, the Commission tentatively concluded that to receive section 214 authority to discontinue, reduce, or impair a legacy copper service that is used as a wholesale input by CLECs, an ILEC must commit to providing CLECs IP wholesale services with equivalent rates, terms, and conditions.

ILECs – ILECs argue that a new section 214 obligation requiring them to provide functionally equivalent IP wholesale services to CLECs is not necessary and would slow IP network deployment. For example, CenturyLink notes that,

As legacy services reach the natural end of their life cycles, they are being replaced by higher capacity Ethernet and other IP-based services offered by CLECs, cable operators and others, and this customer-driven transition makes coerced continuation of the legacy services impractical and harmful to consumers’ interests. Given the wealth of available competitive alternatives, the Commission should not hamper the IP transition by requiring, for the first time, approval under section 214(a) for the replacement of one technology for another or the elimination of a wholesale offering absent any  effect on retail customers. In fact, the need to eliminate an inefficient, redundant service has been held repeatedly to be a significant factor justifying discontinuance. A requirement that an ILEC offer equivalent wholesale access whenever it discontinues a wholesale input by other carriers would violate decades of precedent holding that only the effect on end users is relevant to section 214(a) discontinuance. Instead, the Commission should adopt a presumption that discontinuance of TDM voice service is permitted where there exists a reasonably comparable retail interconnected VoIP, circuit-switched cable, 3G wireless, or TDM voice service alternative. That reasonable alternatives might be more administratively burdensome or costly than the discontinued service or result in some customer dislocation does not weigh heavily against discontinuance under section 214(a) (CenturyLink Comments at pp iii-iv).

CLECs – CLECs contend that the Commission’s tentative conclusion is correct, ILECs must be required to make functionally equivalent wholesale IP services available to competitors before they are permitted to discontinue a wholesale TDM service. As XO states:

Where incumbent LECs choose to discontinue TDM-based services in the transition from TDM to IP-based services, XO and other competitive LECs are likely to lose the ability to access last-mile facilities necessary to serve their customers, for example DS1 and DS3 special access lines. As a result, XO supports the Commission’s tentative conclusion to require ILECs that seek section 214 authority to discontinue, reduce, or impair a legacy service used as a wholesale input by competitive carriers to commit to providing competitive carriers equivalent wholesale access on equivalent rates, terms, and conditions…The rates terms and conditions for services that an ILEC plans to make available as an equivalent alternative to discontinued offerings should be posted on the ILEC’s website. Moreover, the Commission should impose the obligation on ILECs that seek discontinuance to commit to offer such equivalent services indefinitely, or at least until such time as the Commission makes a specific finding in the relevant geographic and product markets that competition has developed sufficiently to negate any need for any continued regulatory oversight (XO Comments at pp 26-27).

2. Continued ILEC Unbundled Network Element Requirements

In its Petition for Declaratory Ruling filed on December 29, 2014, Windstream requested the FCC to issue a declaratory ruling confirming that an ILEC’s obligations to provide DS1 and DS3 capacity loops on an unbundled basis pursuant to section 251(c) (3) are not altered or eliminated either by replacement of copper with fiber or by the conversion from the TDM to the IP network. 

ILECs – ILECs argue that the FCC made it clear that their unbundling obligations apply only to their TDM networks. Moreover, CLECs are more than capable of using their own networks to service their customers. For example, AT&T argues,

The Commission’s unbundling rules are not—as Windstream claims—“technology neutral.” Rather, the Commission’s Triennial Review Order based those rules on a “bright line ...drawn between legacy technology and newer technology.”  Finding that CLECs were not impaired without access to those newer technologies — and that in many cases they were ahead of the ILECs in their deployment of them — the Commission adopted a rule denying unbundled access to next generation, packet switched technologies, including packet switching itself, fiber loops (particularly in “greenfield” situations) and the packet-switched features, functions and capabilities of hybrid loops.  At the same time, the Commission required ILECs to provide unbundled access to the TDM capabilities of hybrid loops and of DS1 and DS3 loops —legacy technologies that the Commission unambiguously described as “TDM-based services.”  This bright-line distinction between legacy technology and newer technology has been retained by the Commission, upheld by the courts, and remains the foundation of the agency’s current unbundling rules… Windstream asks the Commission to subject ILECs to a regulatory Hobson’s choice: either (a) maintain a TDM network, regardless of cost, solely to satisfy Windstream’s desire to continue receiving legacy DS1 and DS3 services on an unbundled basis, or (b) accept new and unwarranted unbundling obligations on the fiber and packetized capabilities of the next generation fiber network – obligations the Commission has considered and rejected and which would be imposed without the required impairment analysis. Windstream’s Petition is inconsistent with the law and with longstanding Commission policies to encourage all providers to invest in next generation technology and should be denied. (AT&T Comments at pp. 2-3)

CLECs – CLECs claim that the ILEC section 251 unbundling obligations are not technology specific and the Commission must affirm that ILECs must continue to make unbundled DS1 and DS3 loop functionality available even as they retire their copper networks. CompTel states that,

The rules requiring ILECs to provide DS1 and DS3 capacity loops on an unbundled basis are technology neutral. They define unbundled DS1 and DS3 capacity loops by the specific bandwidth delivered to the customer, not the nature the physical connection (copper or fiber) or the electronics (TDM or IP) used in the loop. And the impairment triggers define the areas in which unbundling obligations apply based on the size of the wire center and the cap established by the Commission – not the facility or technology used to provision the loops. As Windstream discusses in its petition, the Commission has found that competitive LECs generally are impaired without unbundled access to DS1 and DS3 capacity loops, and this impairment finding is not altered by an ILEC’s replacement of copper facilities with fiber facilities or TDM equipment with IP equipment (CompTel Comments at pp. 38-39).

With the three Democrat FCC commissioners demonstrating lately (see net neutrality) that they favor more and more government intervention it is likely that multiple regulations will soon be created to govern the transition to IP. This would appear favorable to CLECs. However, ILECs are likely to litigate any FCC attempts to impose any section 251 interconnection and unbundling obligations on their fiber networks.  This strategy would enable them to either win in court, or wait for a Republican president to appoint a new Commission. In the meantime, IP interconnections are proceeding without any regulations, a situation that is risky for CLECs, but is well on its way to becoming a fait accompli.

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