Cybertelecom Federal Internet Law & Policy An Educational Project

Unbundled Network Elements

Derived from Connecting the Globe: V. Competition in Telecommunications Services, FCC 1999

"While full facilities-based competition has many advantages, it may not always be practical for a new entrant to construct an entire network. For example, it may be economically feasible to construct switching and long distance facilities but infeasible to construct local loops or "last mile" facilities that connect to customer locations. This might be due to economies of scale or the practical difficulties associated with acquiring needed rights-of-way. Thus, a second entry route is one in which the new entrant constructs portions of a network and purchases access to the relevant essential facilities of the incumbent provider's network, such as the local loop. This method of entry is referred to as using unbundled network elements, and typically must be required by law or regulation.

"Entry through the use of unbundled network elements has a number of important advantages. First, it reduces entry barriers by allowing new entrants to begin offering service without having to construct an entire network. Second, on a longer term basis, it prevents the incumbent carrier from exploiting any residual monopoly power that may arise through remaining economies of scale or from the practical difficulties of obtaining needed rights-of-way, antenna sites for wireless systems, etc. Third, it allows new entrants additional avenues of innovation. For example, new entrants can purchase unbundled loops from the established carrier and use them with entirely different types of technologies (e.g., packet switches based upon Internet Protocol (IP)) than those employed by the incumbent carrier. In this arrangement, consumers benefit from these new and better services and additional choices that competition provides.

"Regulatory intervention is necessary in order to require the incumbent carrier to unbundle its network and to price the resulting elements at economically efficient prices. More specifically, incumbents should be required to provide any requesting telecommunications carrier non-discriminatory access to elements of the incumbent's network on an unbundled basis on rates, terms and conditions that are just, reasonable, and non-discriminatory. Incumbents should be required to provide any reasonable method of interconnection, including physical collocation or virtual collocation, or interconnection at a point between the incumbent's and new entrant's network.

In the United States, the Telecommunications Act of 1996 identified a minimum list of network elements that incumbent local exchange carriers must unbundle. These network elements include: local loops, network interface devices, local and tandem switching capabilities, interoffice transmission facilities, signaling and call-related databases, operations support systems, and operator services and directory assistance facilities. In addition, new entrants should have access to pole lines, ducts, conduits, and rights-of-way owned or controlled by the incumbent.

Derived from FCC Triennial Review Homepage

Section 251(c)(3) of the Telecommunications Act of 1996 directs the Commission to determine the specific network elements that incumbent LECs must provide to their competitors on an unbundled basis at cost-based rates.

47 USC s 251(c)(3) Unbundled Access

The duty to provide, to any requesting telecommunications carrier for the provision of a telecommunications service, nondiscriminatory access to network elements on an unbundled basis at any technically feasible point on rates, terms, and conditions that are just, reasonable, and nondiscriminatory in accordance with the terms and conditions of the agreement and the requirements of this section and section 252 of this title. An incumbent local exchange carrier shall provide such unbundled network elements in a manner that allows requesting carriers to combine such elements in order to provide such telecommunications service.

47 USC s 251(d)(2) Access standards

In determining what network elements should be made available for purposes of subsection (c)(3) of this section, the Commission shall consider, at a minimum, whether—

(A) access to such network elements as are proprietary in nature is necessary; and

(B) the failure to provide access to such network elements would impair the ability of the telecommunications carrier seeking access to provide the services that it seeks to offer.

This concept of UNEs has its origins in the Computer Inquiry III Open Network Architecture requirements.

The FCC implemented Sec. 251 and created two sets of UNEs known as UNE-L and UNE-P.

UNE-L includes such things as local loop, switches, interoffice trunk lines, database facilities, operations support, and others. Generally CLECs will put these elements together to make a new service and will need to operate their own switch.

UNE-P (or UNE-Platform) "is a combination of UNEs (loop + port is SBC's definition, port involves switching which is bought per minute at a "cost" rate from the RBOCs) that allow end to end service delivery without ANY facilities. Despite not involving any CLEC facilities, it still requires facilities-based certification from the PUC to deliver services via UNE-P. " Note that UNE-P is very similar to Resale.

The FCC has eliminated UNE-P.

The FCC has also decided that fiber service providers do not need to unbundle their fiber networks (for example, Verizon does not need to unbundle FIOS and provide it to its competitors)

LECs have used the forbearance rules in order to remove UNE-L requirements in some circumstances.

UNEs are provided pursuant to TELRIC cost-based rates.

Procedural History

In December 2001, the Commission issued the Triennial Review NPRM seeking comment on how best to update its rules and make them more “granular” to reflect competitive conditions in different markets. The Commission’s prior rules specifying the list of unbundled network elements (UNEs) were struck down by the D.C. Circuit in United States Telecom Association v. FCC (USTA I) on May 24, 2002.

"On August 21, 2003, the Commission released a Report and Order and Order on Remand (Triennial Review Order) that comprehensively re-examines the network element unbundling obligations of incumbent local exchange carriers (LECs) under section 251 of the Act. The Triennial Review Order created a new list of UNEs. The Commission’s framework provides incentives for carriers to invest in broadband network facilities, brings the benefits of competitive alternatives to all consumers, and provides for a significant state role in implementing these rules. The rules became effective on October 2, 2003, upon publication in the Federal Register.

"Several parties – including incumbent LECs, competitive LECs, state commissions, and state commission consumer advocates – challenged various aspects of the Triennial Review Order. These appeals were consolidated in the D.C. Circuit which issued an opinion in United States Telecom Ass’n v. FCC (USTA II) on March 2, 2004, affirming in part, vacating and remanding in part, the Commission’s Triennial Review Order. The court decision, among other things, vacated the Commission’s delegation of authority to state commissions and the nationwide impairment findings for dedicated transport and mass market switching, while it upheld the Commission’s determinations on mass market broadband loops and the role of section 271 access obligations. After initial stays, the D.C. Circuit and Supreme Court denied further stay requests, allowing the mandate of the D.C. Circuit to become effective on June 16, 2004.

"In July 2004, the Commission adopted a new "all-or-nothing" rule regarding interconnection agreements that requires a requesting carrier seeking to avail itself of terms in another carrier's interconnection agreement to adopt the agreement in its entirety, taking all rates, terms, and conditions from the adopted agreement. This order overruled the Commission's previous "pick-and-chose" rules that allowed negotiating carriers to pick the most favorable individual provisions of state-approved interconnection agreements without being required to accept the terms and conditions of the entire agreement. The Commission determined that this new "all-or-nothing" approach will promote more efficient negotiations between carriers and reduce the burdens on negotiation.

"In August 2004, the Commission extended the fiber-to-the-home (FTTH) rules to include multi-dwelling units (MDUs) that are primarily residential in nature. Under the existing FTTH rules adopted in the Triennial Review Order, incumbent LECs do not have to provide unbundled UNE access to most broadband fiber lines built to a home. The Commission promulgated this ruling in order to spur the deployment of fiber lines by removing the disincentive effects of further unbundling requirements.

"Also in August 2004, the Commission issued an Interim Order and NPRM in response to the USTA II decision that vacated and remanded several sections of the Triennial Review Order. The Interim Order and NPRM invited comments on the implementation of section 251 unbundling obligations and the steps necessary to respond to the USTA II decision.

"In October 2004, the Commission released an Order on Reconsideration subjecting fiber-to-the-curb (FTTC) loops to the same regulatory framework as FTTH loops, drawing on the same rationale it applied in the August MDU Reconsideration Order. In an effort to promote the growth of fiber-based broadband networks to residential customers, these new regulations alleviate the duty of incumbent LECs to provide unbundled access to newly deployed mass market FTTC loops. However, the Commission continues to recognize the persistence of entry barriers in overbuild situations and requires continued access to a copper loop or 64 kbps transition path in those circumstances.

"In December 2004, the Commission adopted an Order on Remand, responding to the USTA II decision, and adopting new rules for network unbundling obligations of incumbent LECs (Triennial Review Remand Order). The key issues in this decision include the clarification of the impairment standard adopted in the Triennial Review Order in one respect and modification of the application of its unbundling framework in three respects

UNE Proceedings

• AT&T commits to continuing to offer and maintain its state approved rates for UNEs and collocation as a condition for the approval of the AT&T Bell South Merger.
• UNBUNDLED ACCESS TO NETWORK ELEMENTS/REVIEW OF THE SECTION 251 UNBUNDLING OBLIGATIONS OF INCUMBENT LOCAL EXCHANGE CARRIERS. Denied the Petition for Stay Pending Judicial Review filed by Verizon. (Dkt No. 01-338 , 04-313). Action by: Chief, Wireline Competition Bureau. Adopted: 03/14/2005 by M&O. (DA No. 05-675). WCB, FCC 3/18/2005
• UNBUNDLED ACCESS TO NETWORK ELEMENTS AND REVIEW OF THE SECTION 251 UNBUNDLING OBLIGATIONS OF INCUMBENT LOCAL EXCHANGE CARRIERS. FCC adopted new rules for network unbundling obligations of incumbent local phone carriers. By Order on Remand. (Dkt No. 01-338, FCC 2/8/2005
• FCC ADOPTS NEW RULES FOR NETWORK UNBUNDLING OBLIGATIONS OF INCUMBENT LOCAL PHONE CARRIERS. New Network Unbundling Rules Preserve Access to Incumbents' Networks by Facilities-Based Competitors Seeking to Enter the Local Telecommunications Market. News Release. Adopted: 12/15/2004. News Media WCB. Contact Jeremy Miller at 1507, email: Jeremy.Miller, FCC 12/21/2004
• Triennial Review - UNEs and Line Sharing
• STATEMENT BY FCC COMMISSIONER KEVIN MARTIN REGARDING VERIZON'S BROADBAND ANNOUNCEMENT. STMT. News Media Contact: Emily Willeford at 2100 CMMR, FCC 3/21/03
• Hearing: Health of the Telecommunications Sector: A Perspective from the Commissioners of the Federal Communications Commission February 26, 2003 10:00 AM, House 2/24/03
• Accelerating Advanced Broadband Deployment in the U.S., IEEE 3/5/03
• Senate hearings urged over FCC decision, CNET 3/5/03
• FCC Member Defends Stance on State Powers, Wash Post 2/28/03
• FCC Chief Thinks Bells Will Invest In Fiber, Internet News 2/26/03
• Bells' Dire Warnings On FCC Rule, atNY 2/26/03
• FCC Chief Says Bells Will End Up Spending Again, Reuters 2/26/03
• FCC's Competition Decision Criticized, Wash Post 2/26/03
• Bell Firms Pledge to Fight New FCC Rules: Voice-Network Sharing To Be Fought in Court, Wash Post 2/26/03
• Broadband access leaps ahead (UK), BBC 3/19/03
• DSL Penetrates the Business Market - Slowly, Newsfactor 3/7/03
• DSL customers brace for price hikes, MSNBC 2/24/03
• Broadband Companies Cheer Ruling, NYT 2/24/03
• Split Decision At The FCC, CommWeb 2/24/03
• The Mother Of All Compromises?, Internet News 2/21/03
• Disconnect At The FCC, Wash Post 2/21/03
• FCC Plans Historic Vote, Internet News 2/21/03
• FCC ruling is split decision for telecom rivals, Mercury 2/21/03
• FCC Phone, Net Rules Send Mixed Messages, Mercury 2/21/03
• High-Speed Service May Cost More, NYT 2/21/03
• FCC loosens broadband rules, CNET 2/21/03
• Baby Bells fall after FCC decision, CNET 2/21/03
• FCC vote a boost for local phone competition, USA Today 2/21/03
• FCC Eases Internet, but Not Phone, Regulation, NYT 2/21/03
• Few Cheers for New FCC Rules, Wired 2/21/03
• FCC: Telco Regs in States' Hands, Wired 2/21/03
• FCC deregulates broadband services, cw 2/21/03
• Mixed blessing for consumers, CNNfn 2/21/03
• FCC review favors CLECs, NWFusion 2/21/03
• FCC gives telcos mixed results on UNE call, Telephony Onl 2/21/03
• FCC Adopts New Rules for Network Unbundling Obligations of Incumbent Local Phone Carriers, FCC 2/21/03
• Chairman Tauzin Blasts FCC Phone Competition Decision, House 2/21/03
• No News From The FCC, ISP Planet 2/19/03
• Telecom Dirms Battling Over FCC Vote, SF 2/19/03
• FCC plans key vote on broadband, MSNBC 2/19/03
• FCC plans landmark vote on broadband, CNET 2/19/03

Papers

• Bauer, Johannes M. "Unbundling policy in the United States: players, outcomes and effects," Communications & Strategies 57, 2005, pp. 59-82.

News