In Forbearance Order, FCC Rejects CLECs' Bid for Longer Market Transition for Government Clients

The FCC granted forbearance from unbundled network element (UNE) analog loop obligations for incumbent LECs to help encourage the continued move away from legacy TDM voice service and to spur further development of next-generation facilities-based networks, it said in an order issued Friday in docket 18-141. The forbearance is conditioned on a two-part transition. Competitive LECs are allowed to order new UNE analog loops for six months after the order's effective date and will grandfather any existing customer relationships for three years. An exception was made for Puerto Rico, where market transition was extended to five years.

FCC commissioners voted to approve the measure July 26, a week before a statutory mandate to act or the forbearance petition would have been deemed granted (see 1907160071). The order follows closely a draft released in July. CLECs asked the FCC to give them more time to move away from regulated resale of voice-grade copper TDM phone services, especially for business customers. In its final order, the FCC said it found the 18-month market transition that some ILECs had requested "insufficient." CLECs lobbied the FCC for longer transitions to give their customers more time to adjust to the changes, it said: "But the fact that some customers may desire a longer transition period than others is no reason to extend an artificial subsidy to them to remain on last-generation technology."

ILECs applauded the decision. “We appreciate that with this vote, the FCC recognizes that robust and nationwide facilities-based competition eliminates the need for outdated resale and unbundling obligations that discourage carriers from making network investments,” said David Bartlett, CenturyLink vice president-federal government affairs, in a statement Friday.

"The FCC approved additional common sense, pro-consumer elements of our petition," said Patrick Halley, USTelecom's senior vice president-policy and advocacy, in an email statement Monday. "USTelecom looks forward to continue working with the Commission to address elements of our petition the FCC did not act on and other deregulatory measures that will incentivize further broadband investment and innovation."

Incompas CEO Chip Pickering told us Monday the great news for its member companies is that the proceedings ended after USTelecom withdrew petitions for forbearance related to dark fiber (see 1906180081) as well as other broadband access and transport loops that will give CLECs the ability to connect their services in small towns to urban and suburban networks (see 1907020058). Incompas plans to work with its member companies to make their market transitions work, Pickering said. He added the industry group will shift to a new fight for increased competition in government services in the telecom sector.

The FCC said it weighed the benefits to CLECs against the costs to ILECs in whether to uphold the regulatory avoided cost resale protections. "In contrast to the substantially diminished benefit of the UNE analog loop mandate in today's communications marketplace, the costs of the mandate are high and rising," the FCC said in its report. "For one, the continued maintenance of the UNE analog loop mandate requires incumbent LECs to maintain outdated TDM equipment even when they no longer desire to offer those services to their customers." It said a mandate to maintain copper facilities "deters incumbent LECs from investing in next-generation network infrastructure and casts a regulatory cloud over long-term network planning regarding the transition to IP-based fiber networks that rely on VoIP."

The order acknowledged the costs for some CLECs may rise due to the ruling, but the agency said its concern is "for competition, and more fundamentally, end users." It was "not persuaded that forbearance will result in unjust or unreasonable voice service rates" and said it won't "maintain inefficient network use merely because removing a legacy unbundling obligation that no longer serves the purpose for which it was adopted would harm the profits of a competitive LEC operating an outmoded business model."

Commissioner Jessica Rosenworcel dissented from the forbearance ruling. "In our haste to make way for the new, I worry we give short shrift to those consumers who depend upon the old. There are still consumers who rely on traditional voice services provided by unbundled copper loops and avoided-cost resale," she wrote. She expressed disappointment that the order "did not do more to guarantee a smooth transition to newly-ordered services, especially when it comes to government users that depend on these facilities."

Commissioner Geoffrey Starks dissented in part, noting analog loops "still play an important role" in certain markets, such as "for service to businesses that have nationwide locations where each location needs one or more line-powered voice lines for voice service, credit card processing" and other purposes. "Competition in this market depends on the availability of voice-grade copper loops for service to Federal government entities," Starks wrote. He said his request was denied to change the transition periods included in the order. Starks also wanted to allow two competitive carriers selected by the federal General Services Administration in a government purchasing contract to continue acquiring new customers under the regulated pricing for the four years left on their government contracts.

CLECs asked for five years to transition government clients. But the agency said its "copper retirement and legacy TDM-service discontinuance regime reflects the expectation that carriers will work with their government and enterprise customers to ensure that they are given sufficient time to accommodate the transition'" to next-generation technology without a loss of functionality during the changes.

Starks dissented except on the longer transition period carved out for Puerto Rico, five years instead of three, that will help give CLECs there "more time to continue their rebuilding and recovery efforts before the changes that will come with the forbearance factor into their business plans," he said. "This change will also save money for customers in Puerto Rico who are benefiting from competitive service as the prices for such services in Puerto Rico will not change due to the granted forbearance during the five-year period."