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Caution Flag in the FCC's Race to Eliminate the Unbundled Network Element Platform
WASHINGTON, June 21 /PRNewswire/ -- Having decided not to pursue an appeal of the Triennial Review Order and received the remand from the D.C. Circuit Court, the Federal Communications Commission (FCC) now has the responsibility to implement the granular analysis of local competition and unbundled network elements (UNEs) that the Court demanded, said Mark Cooper, director of research for the Consumer Federation of America.
The recently released statistics on local competition (Industry Analysis and Technology Division, Wireline Competition Bureau, Local Telephone Competition: Status as of December 31, 2003 (Washington D.C.: Federal Communications Commission, June 2004) show the major challenge the FCC faces.
"If the FCC fails to preserve the UNE-Platform (UNE-P), competition will be devastated," Cooper said. "The detailed market analysis that was being conducted by the state public utility commissions now shifts to the FCC.
"The incumbent local phone companies (ILECs) still have approximately 84 percent of the total local lines and 86 percent of residential lines. While progress has been made, UNEs account for just under two-thirds of all competitively supplied lines -- UNE-P alone accounts for more than half all the competitively supplied lines. Even if the Commission defines a small subset of markets where UNE-P is withdrawn, it will face a major challenge in designing a transition plan to ensure that service is not disrupted when companies switch from UNE-P to UNE-L. If the Commission undermines UNEs altogether, the Competitive Local Exchange Companies (CLEC) industry will collapse and competition will be eliminated.
"When advocates for eliminating UNE-P argue that cable telephony will take its place, they are ignoring the reality of the marketplace. Between December 2000, the first year for which cable telephony is broken out in the FCC data, and December 2003, cable lines grew from 1.1 million to 3.2 million. In contrast, UNE-P grew from 2.8 million to 15.6 million, and today is projected to be as much as 19 million. Moreover, the rapid growth of UNE-P in the past three years played a key role in the decisions to allow the ILECs into the long distance market. A policy that undermines UNE-P on a broad scale will call those decisions into question.
"For years the Baby Bells complained that CLECs were cherry-picking their business customers, who afforded them higher margins, and avoiding competition in the residential market. Our analysis from 2003 showed that this was not the case (Consumer Federation of America, Competition At The Crossroads: Can Public Utility Commissions Save Local Phone Competition?, 2003), and the recent statistics reaffirm our findings. Although the CLECs started in the business market, as soon as the state public utility commissions established the conditions for fair competition in the residential markets, they moved quickly into that market. In December 1999, the first year for which the FCC has reliable statistics, CLECs were about half as likely to serve residential customers than the incumbent Baby Bells. Since then, they have closed the gap. By December of 2003 they were 80 percent as likely to be serving residential customers as the Baby Bells.
"In light of recent events impacting local telephone companies, preserving competition will require close attention and careful regulations from the Commission. Otherwise, local telephone competition and the billions of dollars that consumers are saving through local telephone competition would be jeopardized."
Consumer Federation of America
CONTACT: Mark Cooper, Director of Research of the Consumer Federation ofAmerica, +1-301-384-2204
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