We noted last time that on August 7, 2015, the FCC released its Technology Transitions Order in Docket 13-5. The Order is significant for the industry because it finally addresses the need for viable wholesale services for CLECs during the industry transition from a Time Division Multiplexed (TDM) network to a network using Internet Protocol (IP). 

However, just like the FCC’s Open Internet Order, the Technology Transitions Order was approved on a 3-2 basis. It was supported by the three Democratic commissioners but rejected by the two Republicans. There are disagreements regarding the notice period for ILEC copper retirement, the proper scope for discontinuing services under section 214 of the Act, and the proper role of the Commission in evaluating reasonably comparable replacement wholesale services. 

Here are more details of the split between commissioners:

I. Copper Retirement – The Commission doubles the notice period from 90 to 180 days for ILECs to notify interconnecting carriers of planned copper retirements. According to the Commission:

After reviewing the record before us, we conclude that the Commission’s network change disclosure rules should be updated in light of marketplace developments to address the needs of competitive carriers for more robust notice of planned copper retirements. To make our rules sufficient for this purpose, we revise them to require incumbent LECs planning copper retirements to include in their network change disclosures a description of any changes in prices, terms, or conditions that will accompany the planned changes. In addition…we establish a process in which incumbent LECs must provide direct notice to interconnecting entities at least 180 days prior to the planned implementation date, except when the facilities to be retired are no longer being used to serve customers in the affected service area (Order at para. 16).

The Republican commissioners do not agree that the notice period should be doubled. They note that doubling the notice requirement slows down fiber deployment since copper must continue to be deployed for an extra three months. Moreover, the money spent on copper is not available for fiber, thus slowing down next-generation network investment and build out.

II. Expansion of Section 214 – Section 214(a) of the Act requires a carrier to obtain Commission approval before discontinuing, reducing, or impairing a service.  In his dissent to the Order, Republican Commission Pai notes that “traditionally, the Commission has interpreted [section 214] to apply only when a carrier discontinues service to a particular community entirely, such as by the “severance…. of physical connection,” the “dismantling...of any trunk line,” or the “closing...of a telephone exchange.” However, now that the Commission has 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 ILECs will have to obtain section 214 authority for almost every network change.  According to Commissioner O’Rielly this is a very danger precedent:

There does not appear to be any limiting principle to the Commission’s expansive interpretation of section 214(a). Under this new interpretation, as soon as a carrier starts offering ANY telecommunications service, regulated or not, it has to seek permission to discontinue it and may have to provide an alternative. I am stunned by the breadth of this overbearing regulatory power grab.  I hope all participants in the supposed “virtuous circle” will see how dangerous this reading actually is. Every communications and edge provider better think long and hard before introducing new services because you may be locked in to providing them for a very long time. Instead of promoting “Permissionless Innovation”, we are creating a regime of “Permission and Less Innovation” (Order, p. 178).

III. Reasonably Comparable Wholesale Services – In the Order the Commission requires ILECs to provide reasonably comparable wholesale services for DS1, DS3 and commercial “Network Platform” services on an interim basis until it completes its special access investigation. The Commission notes that it will evaluate compliance with this requirement based on the totality of the circumstances and articulate questions that will guide its inquiry. However, the Republican commissioners argue that this standard for review provides unlimited power for the Commission and even permits the agency to control pricing of IP services. As Commissioner O’Rielly states:

Upon reading the text of the Order, however, I discovered that the factors are described in a way that leaves little room to maneuver, and the standard of review provides staff with a great deal of discretion to weigh the factors as they see fit. Staff will even examine evidence concerning the motivation for an incumbent LEC’s actions. I tried to get clarity from staff and stakeholders about how to interpret this new standard. However, the vaguely reassuring conversations never seemed to match up… Putting it all together, this results in an inflexible regime where providers’ decisions will be questioned at every turn. Moreover, it starts to resemble a scheme to insulate backdoor rate regulation from litigation, rather than a benign effort to preserve the status quo. I cannot agree to that. Supporters point out that these requirements only kick in if a provider files to discontinue service. But the order seems designed to force carriers to file in order to subject them to the problematic pricing regime.  Specifically, carriers will have to engage in a “meaningful evaluation of the impact of actions that will discontinue, reduce, or impair services used as wholesale inputs and … obtain Commission approval if their actions will discontinue service to end users.” That has since expanded to include a requirement to consult with wholesale carriers—as if they have any incentive to ever agree. All of this puts carriers between a rock and a hard place. Either they defer their discontinuances, forcing them to maintain legacy services, or they file for discontinuances and are subject to the new conditions with the language in the item or the sentiments in the ex parte filings (Id., pp. 178-9).

Thus, we have an Order with noble sentiments that will almost surely lead to an expansion of the Commission’s power. Each person will have to decide for him or herself whether they believe this is a good thing or not. ILECs would probably be able to live with the wholesale service requirements if there was a certain sunset date. However, since those requirements will be in effect indefinitely (pending completion of the 10-year old special access investigation), ILECs will almost certainly seek to have this Order overturned by the courts. So, as usual in this industry, even the best intentions likely will lead to more years of uncertainty. 

By Andy Regitsky, CCMI