COMPETITIVE ACCESS TO BELL UNEs DEBATED AT FCBA CONFERENCE

SBC Senior Vp James Smith responded that “in my view the current state of affairs is a disaster” and noted that WorldCom pays SBC “40 cents on every dollar of our costs” to use UNE-P. “This is an unsustainable business model” that’s being used only because prior Commission pushed it through, Smith said. Despite Telecom Act mandate for facilities-based competition, there’s been little of it, he said, “only this phony competition that regulators are force-feeding us.”

Al Mottur, Democratic communications counsel of Senate Commerce Committee, urged panelists to remember it would take time for facilities-based competition to develop, just as it took some time for facilities-based long distance competition in 1980s. Smith pointed out, however, that facilities-based competition grew in long distance without AT&T being required “to offer its network to competitors” at below cost. “I do have a problem when I have to offer [the network] at a price well below my cost,” he said.

Debate between Sorgi and Smith gained steam when lawyer Henry Rivera, one of moderators, asked about success of Sec. 271 process. Sorgi said Telecom Act called for quid pro quo of long distance companies’ entering local competition as Bells entered long distance business. “I accept that quid pro quo but I don’t think the Bells do,” she declared. Smith responded that while Sorgi said she had no problem with such tradeoff, “at the same time her company actually is opposing our entry in long distance.” In response to another question, Smith said SBC offered alternative UNE plan that would encourage business-to-business negotiations for payment, adding that Telecom Act intended business-to- business arrangements “but certain regulators jumped in and force-fed competition.” Sorgi quickly added that “the price he’s offering is $26 a month, 35 to 40% higher than any state commission has offered, higher than my retail rates.” Sorgi said Smith talked about doing business-to-business negotiations “but what leverage do we have. He has everything.”

Sorgi and Smith agreed on one issue -- whether voice- over-IP telephony should be regulated. Sorgi said she didn’t think so because Internet’s lack of regulation had made it “vibrant.” Mottur said answer was “clearly not yet,” but there was question of how universal service funding would be affected once larger amount of traffic migrated to VoIP. “Finally, I found one where Donna and I agree,” Smith said. He said he also agreed with Mottur that it would be necessary to look at universal service funding as VoIP usage increased.

Randolph May of Progress & Freedom Foundation said telecom policy was “at least a contributor” to economic difficulties experienced by industry and “if the policy is changed it can play a role in speeding the recovery.” May said policy-makers contributed to meltdown of industry by sending signals to market “that the FCC was going to support entry that was not really economic and could not be sustained.” Mottur said lack of regulatory certainty could be factor in industry downturn but regulators didn’t force companies to write poor business plans. “If the Commission simply enforced the Act, you would see a stable marketplace with less litigation,” he said. “To go further and reward incumbents prior to [existence] of sufficient competition would be a disastrous mistake and lead to remonopolization.” Matthew Brill, aide to FCC Comr. Abernathy, said he took issue with idea that Commission played role in industry’s economic woes. He said agency twice wrote rules for UNEs and twice rules were overturned by courts. “Main cause” for confusing regulatory signals was previous Commission’s “failure to heed the limits in the statute,” he said. Nanette Thompson, chmn. of Regulatory Commission of Alaska, said she found it “troubling” that regulators would be accused of having effect on financial markets. “Our job is to make the tough decisions” without “picking winners and losers,” she said.

In speech earlier in day, FCC Comr. Copps urged industry not to “lose focus” on efforts by Network Reliability & Interoperability Council (NRIC) to protect nation’s infrastructure against terrorist attacks (CD Dec 9 p1). Copps said he was pleased that NRIC was working on best practices but he was concerned that such activities could take years to implement. He said he also was “skeptical” that job could get done voluntarily and if progress broke down he “wouldn’t hesitate” to support mandate from FCC forcing action. Repeating view he has voiced in past, Copps said he was concerned about differing regulations for different platforms that provided similar services, such as DSL and cable modems. However, fixing that is “tricky business,” he said. Regulators may never “get to a one-size- fits-all [approach] but we need to get away from [applying different] regulatory regimes to increasingly similar services.” He also repeated his call for better post-Sec. 271 reviews to determine whether telcos were complying with market-opening requirements and said he had “nearly unanimous support” on Commission.

Wi-Fi Legislation Isn’t Last-Mile Solution, Allen Says

Wi-Fi wireless broadband isn’t solution to “last-mile” problem in broadband deployment, Sen. Allen (R-Va.) told conference earlier in day. However, he said his legislative proposal to open more unlicensed spectrum for Wi-Fi still would foster more deployment of broadband. “Ultimately, it will get more people to use broadband,” he said. When asked about other broadband initiatives, Allen said Wi-Fi bill would be his primary legislative goal. He told reporters later that he didn’t believe broadband deregulation bill similar to Breaux-Nickles measure would get enough support to pass Senate and it was likely FCC would have to resolve issue.

In a Dear Colleague letter in Nov., Allen and Sen. Boxer (D-Cal.) sent draft of bill that would devote 255 MHz of contiguous spectrum below 6 GHz for unlicensed use by wireless broadband. In letter, Allen and Boxer said they intended to introduce bill in upcoming 108th Congress. He said incoming Senate Commerce Chmn. McCain (R-Ariz.), along with Sens. Ensign (R-Nev.), Kennedy (D-Mass.) and Wyden (D- Ore.), had expressed interest in Wi-Fi legislation. Broadband isn’t “knight in shining armor” that will rescue telecom industry from doldrums, Allen said, but more broadband deployment could create overall improvements in economy.

Allen said he didn’t subscribe to wireless industry’s concern that releasing more unlicensed spectrum was unfair since wireless companies had paid billions for spectrum rights. “It’s not exclusive spectrum,” he said, noting that Wi-Fi was likely have interference problems in some cases. Allen said spectrum that wireless companies used would be more helpful for last-mile deployment, and wireless companies are free to use unlicensed spectrum as well. Wi-Fi offers many advantages, Allen said. “It’s compelling for deployment in urban areas because you wouldn’t have to dig up the streets,” he said. Legislation’s “primary purpose is not to bridge the last mile, it’s to stimulate business and consumer demand.”