DEPARTMENT OF COMMERCE

NATIONAL TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION

 

 

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Request for Comments on Deployment       :

Of Broadband Networks and Advanced       :           Docket No. 011109273-1273-01

Telecommunications                                      :

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COMMENTS OF WORLDCOM, INC.

 

 

            Pursuant to the National Telecommunications and Information Administration’s (NTIA), Request for Comments on the Deployment of Broadband Networks and Advanced Telecommunications, WorldCom hereby submits comments on the questions posed in the Notice, dated November 19, 2001.

 

I.          INTRODUCTION & SUMMARY

            WorldCom commends NTIA’s efforts to study the availability and deployment of broadband in the United States.  Vint Cerf, Senior Vice President of Internet Architecture and Technology for WorldCom, was honored to participate in NTIA’s Broadband Forum, held on October 12, 2001, and WorldCom looks forward to a continuing dialogue with Assistant Secretary Nancy Victory and her staff.  

As a provider of high-speed services, WorldCom appreciates the opportunity to inform the Bush Administration on the issues that impact our ability to serve consumers and businesses.   Because there is no “one size fits all” means of delivering advanced services, WorldCom has invested in different technologies to meet the demands of our customers.  WorldCom offers one of the industry’s most comprehensive portfolios of digital and e-business communications services.  Through the platforms outlined below, we are able to deliver a wide range of services, including Internet, VPNs (virtual private networks), frame relay and ATM.   In order to provide these services, WorldCom employs the following broadband platforms in our service portfolio, all of which are directly reliant on a government policy that promotes and effectuates competition:

·        DSL:  With the recent acquisition of Rhythms DSL assets, WorldCom is now a facilities-based provider of DSL service in over 700 central offices covering 31 markets across the United States.  WorldCom provides DSL service in these circumstances using its own electronics, i.e. DSLAMs, and the BOCs’ unbundled loops.  With the Rhythms DSL assets, WorldCom is able to deliver DSL service to wholesale and retail customers who can access WorldCom’s complete suite of data and Internet services.  Where WorldCom does not have the facilities to serve a particular customer that is most-appropriately suited for DSL, we must purchase DSL service from an alternative provider, which in most cases is the BOC.

·        Dedicated Circuits:  WorldCom provides broadband access to businesses by building dedicated facilities or leasing special access from the BOCs.  Dedicated or special access is an exchange access service that provides a transmission path between two or more points, either directly, or through a central office.  WorldCom uses dedicated and special access to provide a wide variety of services, including dedicated Internet access, frame relay and ATM.

·        MMDS:  WorldCom provides Multi-Channel Multi-Point Distribution Service (MMDS), a wireless broadband service, in many small and mid-sized markets.  WorldCom currently holds MMDS licenses covering more than 31 million households in over 100 markets. 

With respect to the provision of DSL and special access, WorldCom remains dependent on the Bell Operating Companies (BOCs) to deliver the critical, last-mile “upstream” piece parts necessary for delivery of “downstream” services, like Internet, frame relay and ATM.  As a result, most of the competitive issues and policy considerations set forth in our comments focus on access to these “upstream” last mile facilities. 

Spurred on by the Telecommunications Act of 1996 (“Telecom Act” or “1996 Act”), broadband has exploded in the United States.  Statistics collected as part of the FCC’s Section 706 docket show that in 2000, high-speed subscribers were reported in all of the nation’s states and territories and 75 percent of the nation’s zip codes, which contain 96 percent of the country’s total population.[1]  Furthermore, high-speed lines connecting homes and businesses grew by 158 percent in 2000.[2] 

Recent data suggests that broadband service is available to most people in the United States who wish to purchase it.  The current level of broadband subscribership, which is expected to reach about 10 percent by the end of this year, appears to be driven by consumer demand issues and not supply.  Because a minority of residential customers subscribes to broadband, Universal Service support for advanced service is not justified at this time.   WorldCom believes that competition is the key to maintaining growth and innovation in high-speed data services.  Competition spurs innovation and brings lower prices.

The Telecom Act has made it possible for WorldCom and others to deliver competitive broadband services.  A fundamental underpinning of the 1996 Act is that competition among service providers is the surest means of ensuring the availability to consumers of an array of telecommunications services at reasonable prices. The Act recognizes that the development of competition will require access by competitive companies to elements of the incumbent LECs’ networks, and requires that the prices established for use of these network elements be based on cost.           

Access by competitors to unbundled network elements at cost is required because competition in the provision of network functions cannot develop rapidly for all network functions, and may not develop at all for other network functions. Where the cost structure of a network function is such that competition may develop, competitors will require time to deploy facilities and to develop the capability to provision that function to consumers.  In the meantime, access to the ILECs’ unbundled network elements will hasten the development of facilities competition by permitting competitors to develop a customer base. Where the cost structure of a network function is such that competition may not feasibly exist, because of the existence of economies of scale, a bottleneck monopoly function is controlled by the ILECs, and access by competitors to the ILECs’ unbundled network functions may be required indefinitely.  Under these circumstances, availability of the bottleneck network elements is the sine qua non of facilities-based competition.  Without access to the network elements that cannot be replicated profitably, the competitors will be effectively shut out of the market and invest nothing.

WorldCom has expended significant resources at the FCC, in the Courts and on Capitol Hill to fight for rules that are consistent with the competitive mandate of the Telecom Act.  Without such pro-competitive rules that grant us access to the last mile upstream facilities, WorldCom could not compete in the broadband business.  Unfortunately, just as the pro-competitive rules are beginning to bear fruit, there is pressure in Washington to “deregulate” advanced services.  The BOCs and their supporters are all over Congress and the FCC to remove the so-called onerous regulatory requirements that they claim are slowing broadband investment.  In these comments, WorldCom attempts to set the record straight on the current unbundling obligations and their efect on broadband deployment in the United States. 

The BOCs argue that rules that require them to share access to their facilities serve as a disincentive for further investment and hamper their ability to compete with other broadband providers, such as cable companies.  While such arguments sound appealing on their face, the truth of the matter is that the four Bell Operating Companies have enjoyed a government-sponsored monopoly for nearly 100 years.  They control the essential facility necessary for competitors to provide broadband service, and without unbundled access to those facilities, the United States would not have the innovative broadband service offerings available today.

Complaints by the BOCs that current regulatory requirements stifle investment in broadband technology are belied by the rapid deployment of DSL services.  The FCC’s statistics on DSL deployment for the year 2000 show that 92% of all ADSL lines were provided by incumbent local exchange carriers (ILECs), with the four RBOCs having over 1.7 million ADSL lines in service.[3]  This is compared to 162,225 of CLEC total ADSL lines.[4]   Moreover, ADSL deployment increased by 435% in one year.[5]  Without the 1996 Act and the pro-competitive rules that followed its adoption, it is unlikely that the BOCs would have many DSL lines in service because it was the DSL competitors who were the first to roll-out the service, which, along with cable, spurred on the BOCs to deploy advanced services. 

In advocating for deregulation of advanced services or that new rules should apply for new lines, the BOCs are essentially asking the government to undo the requirements of the 1996 Act.  The only means of achieving innovation, growth and productivity is by fostering competition, and competition can only be achieved if there are rules in place that permit competitors to have nondiscriminatory and cost-based access to the last-mile facilities controlled by the BOCs.

Allowing competitors access to the loop facility to provide DSL services is hardly something that should halt deployment of advanced services.  If CLECs are not able to access the full, features, functions and capabilities of fiber fed loops to provide broadband data services, they will be precluded from providing DSL services to any consumer served out of a remote terminal.  The fact that the infrastructure that supports DSL has evolved into a fiber-fed Digital Loop Carrier (DLC) system does not change the requirement that CLECs have access to the loop and all its functionality.

            The Telecommunications Act of 1996 provided the framework for such competitive access, and for nearly six years, the FCC, by adopting pro-competitive rules, has established a foundation for competitors to deliver high-speed services.  Just as competitors are availing themselves of these rules, the BOCs are doing everything in their power to take them way.  This Administration should not support their efforts. Rather, it should promote the existing pro-competitive rules and enforce those rules that have facilitated competition in “downstream” services.

The Administration should also promote policies that encourage the development of wireless alternatives for broadband access, and adopt a national policy promoting cost-based fees directly related to the use of rights-of-way.  Finally, the Administration should take positive steps toward non-discriminatory access in federal buildings. Specifically, the government should promote non-discriminatory access in the buildings where it is the landlord and where it is a major tenant.  True competition in the advanced services market cannot exist until all customers, residential and business, are freely able to choose the provider best able to support their needs.

 

II.        THE DEFINITION OF BROADBAND WILL EVOLVE OVER TIME

The first and perhaps best place to look in defining “broadband” is what Congress intended when it passed the Telecommunications Act of 1996.  Section 706(b) of the 1996 Act defines “advanced telecommunications capability” as “high-speed, switched, broadband telecommunications capability that enables users to originate and receive high-quality voice, data, graphics, and video telecommunications using any technology.”[6]  In its first Report to Congress on Section 706, the FCC defined broadband as “having the capability of supporting, in both the provider-to-consumer (downstream) and the consumer-to-provider (upstream) directions, a speed (in technical terms, “bandwidth”) in excess of 200 kilobits per second (kbps) in the last mile.”[7]  The FCC reasoned that 200 kbps provides sufficient bandwidth so that consumers can utilize the capacity to perform popular functions such as surfing the Web or transmitting full-motion video.[8]  However, the Commission acknowledged that “evolution in technologies, retail offerings, and demand among consumers” may in the future raise the minimum speed for broadband.[9]

The FCC also categorized the various networks used to provide advanced services, such as backbone facilities, middle mile facilities, last mile facilities, last 100 feet, and connection points.[10]  The Commission has indicated that it will “focus particular attention on the deployment of last mile facilities because they are often the missing link in communities that do not have access to advanced telecommunications capability.”[11]  Examples of these types of services include cable modem service, DSL service, other LEC-provided wireline services (such as T1 lines), terrestrial wireless service, and satellite service.[12]  Of these services, only cable modem service and DSL service have shown any appreciable availability (supply) or penetration (demand) in the residential marketplace.

A logical question follows as to how the definition of broadband should evolve over time.  The FCC has explicitly acknowledged that the minimum speed for broadband – the key defining factor – will change with “evolution in technologies, retail offerings, and demand among consumers….”[13]  How to incorporate those various changes into a definition is a difficult proposition, given the complex interplay between technology, service provider offerings, and consumer demand.

In the first Section 706 proceeding in 1999, WorldCom urged the FCC to accept the basic notion that a benchmark standard should be set above the bandwidth that most residential customers use today, but well below the fastest rates possible with today’s technologies.  The Commission agreed.[14]  That standard obviously needs to be revisited periodically and reviewed in light of the most recent available evidence.  The FCC has attempted to narrow the focus to the bandwidth rates allowed, for example, for a certain multiple in speed beyond the Internet access received through a standard phone line at 56 kbps.  Under the current FCC definition, this comes out roughly to a multiple of four.  Over time, with the introduction of new technologies, or increasing consumer demand, that multiple likely will increase.  The important point is that the standard needs to be flexible enough to accommodate constantly changing market conditions, but stringent enough only to include those facilities and services that offer a considerable improvement in bandwidth over plain old telephone service (POTS).

 

III.       THERE IS AN ADEQUATE SUPPLY OF BROADBAND IN THE U.S.

Recent data suggests that broadband service is available to most people in the United States who wish to purchase it, but that the vast majority of U.S. households have yet to decide whether they value the service enough to justify subscribership at current prices.  Thus, the current level of broadband subscribership, which is expected to reach only about 10 percent by the end of the year, appears to be in large part driven by consumer demand issues, not supply.  As discussed below, there are several steps regulators can take to lower prices for advanced services, which is the most effective way to hasten the adoption of a service for most people. 

The vast majority of Americans have access to broadband service today.  FCC Chairman Powell recently stated that broadband will reach almost 85 percent of U.S. households this year.[15]  The Yankee Group predicts that 75 percent of U.S. homes will be able to receive Internet access from cable modems or DSL by the end of the year, up from 60 percent last year.[16]  Chairman Powell further noted that a J.P. Morgan study indicates that, by the end of the year, 45 percent of households will have access to DSL and 73 percent will have access to cable modem service.[17]  Specifically, ADSL lines, which primarily serve residential customers, increased by 108 percent during the second-half of 2000 and 435 percent for the full year.[18]  High-speed service over cable systems increased by 57 percent during the last half of 2000, with a full-year growth rate of 153 percent.[19]  In addition, the provision of high-speed lines by satellite and fixed wireless technology more than doubled from 1999 to 2000.[20] These statistics demonstrate that advanced services are being made available at an ever-increasing rate.

Broadband penetration far exceeds the historic penetration levels of other technologies as they were introduced in the marketplace.  The Commission in its First Section 706 report compared the pace of broadband deployment at the end of its second year to the pace of deployment of telephone service, black-and-white television, color television, and cellular service at the end of their second year, and concluded that the pace of broadband deployment was comparable to black-and-white television and significantly ahead of telephone service, cellular service, and color television.[21]  In his report on broadband deployment, Commission economist Wayne A. Leighton compared broadband deployment to that of electricity deployment, concluding that “…the deployment of broadband to virtually all Americans is likely to take a fraction of the time it took to deploy electricity….”[22] 

Described below are the market trends with regard to specific categories of advanced services.

DSL Service.  According to new statistics published by TeleChoice, Inc., at the end of the third quarter of 2001, the United States had 3.8 million DSL lines in service.[23]  The ILECs control an overwhelming majority of the DSL lines in service, with market share between 85 and 92 percent.[24]  Today, there are two national competitive DSL providers, Covad and WorldCom, and a handful of regional providers, all of which control less than 15% of all DSL lines in service.[25]  

The four Bell Operating Companies (BOCs)—BellSouth, Qwest, Verizon and SBC—are aggressively rolling out DSL service.  BellSouth “is moving forward aggressively with its [DSL] rollout plans,” currently with 60 percent of its lines DSL-ready and expecting to hit 70 percent by the end of 2001.[26]  Even in the midst of reduced-earnings forecast for fourth quarter 2001, BellSouth “let stand its aggressive goal of reaching 600,000 DSL customers by year-end.”[27]  Similarly, sixty-seven percent (67%) of Qwest’s residential homes are DSL-enabled, and “stiff competition in the race to win high-speed Internet subscribers has spurred Qwest to develop new service and price packages.”[28] 

Verizon recently announced that it has one million DSL subscribers from Maine to Hawaii.[29]  More than 50 percent of the homes in Verizon’s territory have access to DSL, representing an 85 percent increase in DSL lines year-to-date.[30]  Likewise, SBC has deployed advanced-services capability to 58 percent of wireline locations, and Project Pronto will aggressively attempt to reach all consumers in its territory.[31] 

On the competitive side, Covad’s national DSL network covers more than 40 million homes and businesses in 94 metropolitan statistical areas.[32]  At the end of the third quarter of 2001, Covad had 346,000 DSL lines in service.  WorldCom’s acquisition of key Rhythms DSL assets will allow us “to deliver business-class DSL access to a wide range of services, including Internet, VPN, frame relay and ATM, through approximately 700 central offices in 31 major metropolitan areas where WorldCom already has a solid DSL customer base.”[33]

Even rural America is getting access to broadband.  Independent rural telephone companies have aggressively been rolling out high-speed services in rural areas, and, by many accounts, are doing so much more rapidly than the BOCs.[34]  According to the National Telephone Cooperative Association (NTCA), independent local telephone providers feel more of an obligation to meet the needs of their communities than do large operating companies.  A recent study conducted by NTCA shows that about 60% of the survey respondents’ customers can receive service of at least 200 kilobits per second downstream.[35]  Moreover, a survey of rural telecommunications companies conducted by the National Exchange Carrier Association (NECA) shows that about 65 percent of rural lines will be capable of providing broadband by 2002.[36]  “This fact, coupled with the ambitious rollout of data network services documented in NECA’s Access Market Survey, show that rural telephone companies are trying to meet their customers’ needs for high-speed lines.”[37]

Cable Modem Service.  Like DSL, the provision of advanced services over cable modems is increasing rapidly.  Cable modem service is available to more than 65 million U.S. households today, and is not limited to urban and suburban parts of the country.   The FCC’s statistics on subscribership show that there were 3.6 million cable modem lines in service at the end of 2000.[38]

Cable companies are expanding into rural areas, including small towns like Chillicothe, IL, Thief River Falls, MN, Gauley Bridge, WV, and Warner, SD.[39]  Sjoberg’s Cable in Minnesota, which has served rural areas for nearly 40 years, is now rolling out high-speed cable modem service.[40]  Overall, the cable industry’s upgrades are now three-quarters percent complete.[41]

Fixed Wireless.  Though a much smaller piece of the broadband pie, the fixed wireless business also has made inroads in the provision of advanced services.  Fixed wireless technology uses radio signals rather than copper wire, cable, or fiber, to provide advanced services.  Large companies, such as WorldCom and Sprint, serve approximately 300,000 customers nationwide.  Small rural companies, such as Sioux Valley Wireless in South Dakota, also offer MMDS.[42]   At present, most MMDS offerings are targeted at business users.

Satellite Service.  Satellite service currently is technologically capable of providing high-speed Internet access to almost 100 percent of the country.[43]  Direct TV, the largest satellite provider in the country, offers a service called DirecPC, which provides two-way satellite transmission of data at speeds of up to 400 kbps for downloading and 128 to 256 kbps for uploading.  EchoStar’s DISH network provides two-way broadband access to the Internet via satellite.  EchoStar advertises that its service is offered anywhere in the U.S., including Alaska, Hawaii, and Puerto Rico.[44]  WorldCom has forged a partnership with Hughes Network Systems to offer two-way Internet access services for businesses over the Hughes satellite network.  This service is particularly attractive to rural customers not within the reach of DSL providers.

 

IV.       DEMAND FOR BROADBAND IS STRONG YET THE TAKE-RATE FOR RESIDENTIAL SERVICE REMAINS LOW

 

Demand for broadband service has increased many-fold every year since its inception and is expected to continue to increase for the foreseeable future.  Demand for broadband among businesses is quite healthy, and even the demand for broadband among residential consumers is encouraging.  Jupiter Research, which analyzes aspects of the Internet and new technologies, predicts that by 2006, 41 percent of U.S. households will subscribe to a broadband service.[45]  Cable modem access subscribers grew by 825,000 in the third quarter of 2001, bringing the number of cable modem users to 6.4 million, about 9.1 percent of the 70 million homes able to receive the service. 

Nevertheless, the overall take-rate among U.S. households for broadband service remains quite low today.  Experts predict that by the end of 2001, the percentage of residential broadband subscribers will be approximately 10 percent,[46] or, 10 million households.[47]  Available data indicates that the take-rate is low not because broadband service is unavailable, but because most Americans do not yet know if they want to be a broadband subscriber at home, at least at current prices.  The results of a recent survey by the Winston Group and Hart Research confirm this:  “We’ve discovered that availability of high-speed access isn’t the issue for most Americans.  It’s a lack of perceived value,” stated David Winston of the Winston Group.[48]  Similarly, an analyst with the Yankee Group observed that, “[i]t needs to be driven by a more compelling application than just availability.”[49]  Another Yankee Group analyst stated recently that, “with broadband, adoption going forward is going to depend on how services are priced and packaged. They need to become cheaper.”[50] 

In another study, Staff of the Florida Public Service Commission conducted a survey on Internet use in the first and second quarters of 2001, and found that approximately 72 percent of the respondents were not willing to pay for high-speed Internet access.[51]  Adams Group, Inc., which represents a coalition of rural local exchange carriers, reported that only 15 percent of its customers indicated that they would pay approximately $45-49 for DSL.[52]  A recent study by the General Accounting Office found that about 80 percent of those with dial-up service would not be willing to pay more than $10 extra per month to upgrade to broadband.[53] 

The Florida Report also concludes that dial-up Internet access is sufficient to meet the needs of most Internet users, with the exception of those individual desiring entertainment applications.[54]  The report cites research by Forrester Research, Inc. that found that today’s high-speed customers tend to be mostly “tech-savvy” individuals who are likely to publish websites and use the Internet for financial provider sites, and that the next generation of high-speed customers will most likely use high-speed services for video- and music-entertainment purposes, television network sites, and instant access to local movie theatre times and daily news.[55] 

Some analysts note that the “need for speed” is tempered by the lack of a “killer application,” or, a computer application that makes worthwhile access to high-speed services.   WorldCom agrees.  Based on current market conditions, we are not yet at the point where most residential consumers value broadband services such that they are willing to purchase it for use at home.  Would-be subscribers are not subscribing to DSL and cable modem access because they do not see the need for the service if they use the Internet primarily for e-mail, instant-messaging, and ordering items from online retailers, according to a recent news report.[56]  Indeed, Chairman Powell recently stated that broadband deployment should not be measured by adoption rates, “because there are many questions that remain as to what services consumers will value, and to what degree they will be willing to subscribe.”[57]  He further noted that the relatively low level of demand for broadband at this time could be attributed to the fact that “[c]onsumers may not yet value the services at the prices they are being offered.  That is, the prices may be too high, in the minds of consumers, for the value they get.”[58]  This may be especially true because, according to recent reports, many consumers would rather conduct their Internet business using a high-speed connection at the office.[59] 

Finally, it is important for policymakers to bear in mind that without a computer, access to advanced services is meaningless.  Currently, only 51 percent of U.S. households own a computer, and only 41 percent have Internet access of any type.[60]  Policymakers should not fail consider computer ownership issues in their assessment of broadband deployment. 

V.        THERE IS NO CURRENT NEED FOR UNIVERSAL SERVICE SUPPORT FOR ADVANCED SERVICE

 

While “broadband access for all” seems a laudable public policy goal, the federal government should consider carefully both whether to adopt this goal and what its role should be in achieving it.  WorldCom believes that, for the present time, the federal government should monitor broadband deployment issues before engaging in the implementation of any significant, additional broadband deployment initiatives.  In recent comments responding to the Universal Service Joint Board’s inquiry into whether federal universal service support should be provided for advanced services, WorldCom was joined by the overwhelming majority of commenters in concluding that it would be inappropriate at this time to provide federal subsidies for broadband service.[61]  WorldCom found this to be true on both legal and policy grounds. 

The threshold legal requirement triggering a decision that a service must be supported demands that the service have characteristics that are substantially related to the four “factors” that Congress outlined in section 254(c)(1) of the 1996 Act: (1) the service is “essential” to education, public health, or public safety; (2) the service is subscribed to by a “substantial majority of residential customers;” (3) the service is being deployed in public telecommunications networks; and (4) the decision to support the service is in the public interest. 

At the present time, broadband has an insufficient nexus with these legal requirements.  It is not a service that is “essential” to education, public health or safety.  The statute requires the Joint Board to consider whether services supported by universal service are essential to delivering a limited a limited set of public “goods” --  education, public health, or public safety.  In other words, whether advanced services are essential to home-office use or entertainment is not under consideration.  High-speed, broadband access does not today provide access to any essential education, public health, or public safety offering.  Indeed, lower-speed dial-up access does not provide access to any essential education, public health or public safety offering.  Internet access services do allow an end-user to reach the Internet, which is full of helpful information, but that information offering does not rise to the level of a necessity as contemplated by the statute’s use of the word “essential.”  Furthermore, broadband service is subscribed to by a small minority of residential customers.  Because a “substantial majority” constitutes an amount significantly greater than 50 percent, we are far from the point where a “substantial majority of residential customers” subscribes to advanced services, as contemplated by section 254(c)(1)(B) of the Act. 

Furthermore, in considering whether to implement broadband access policies, the government must consider the risk of picking technology winner and losers.  For example, providing universal service subsidies for advanced services potentially benefits only carriers offering certain types of services.  Under section 254(e) of the Act, universal service support is provided only to those carriers that have been deemed “eligible telecommunications carriers (ETCs).”  To be deemed “eligible,” a telecommunications carrier must offer all the services that are supported by the universal service support mechanism.  If advanced services were added to the universal service definition, some carriers that are technologically incapable of providing advanced services would be ineligible for any federal universal service support.  In addition, there may be providers of advanced services that are unable to provide the complete list of services currently supported by universal service or that provide services in a way not contemplated by the rules governing the designation of ETCs.  These might include wireless carriers or cable television companies.  These carriers would be rendered ineligible for federal universal service support destined for advanced services.  Policymakers must be careful not to implement policies that are not competitively and technology neutral.

Additionally, a simple cost/benefit analysis reveals high costs and uncertain benefits of providing subsidies for advanced services.  For example, one possible estimate for the cost of advanced services support has been provided by the National Exchange Carrier Association (NECA), which  estimates that the cost of upgrading rural networks to provide advanced services would be approximately $11 billion.[62]  At the same time, the benefits of subsidizing advanced services deployment cannot be easily defined or sized, because we still do not know the extent to which a need for broadband will be unmet.  Advanced services are quite new, and the technology itself is still evolving. Furthermore, market forces appear to be encouraging broadband deployment at a reasonable pace, and there seems to be no shortage of federal, state, and local government initiatives aimed at spurring broadband deployment.  A multi-billion dollar price tag for something for which consumer demand is lacking and proven benefits are unclear warrants a wait-and-see approach at this time. 

Even more staggering than an $11 billion price tag, some experts estimate that it would cost non-Common Line pool companies (i.e., RBOCs) approximately $80 billion to rehabilitate “last-mile” facilities for broadband capability.[63]  NECA indicates that the cost of “last-mile” facilities is an ongoing concern for its members.[64]  Assuming for the moment that only the rural common carrier line pool companies received support for upgrading “last-mile” facilities, the universal service fund would grow to three-times its current size.  NECA also is currently is conducting a second study focusing on the costs of upgrading “middle-mile” transport facilities, which are those that provide connections between the “last-mile” and the Internet “backbone” facilities.  The Texas Commission estimates that upgrading “middle-mile” facilities are the significant, if not principle, cost-driver when determining whether deployment to a rural area is economical.[65] 

The cost associated with providing federal subsidies for broadband deployment seems particularly high when existing broadband deployment initiatives already are successfully helping to deploy broadband in communities across the country.  Numerous state and local government initiatives and programs are speeding the deployment of broadband services to meet the needs of their particular communities.  Colorado and Western Massachusetts, for example, use “demand aggregation” to attract private sector investment in advanced services.  “Demand aggregation” requires businesses and organizations to pool their telecommunications traffic to provide a market incentive for private companies to set up high-speed connections across the state.[66] Chairman Powell highlighted “demand aggregation” as an effective way to further the reach of broadband service, stating that, “[w]e have seen a number of very effective initiatives by local communities that aggregate demand in a manner that entices broadband providers to serve their community (for example, in Berkshire and Cape Cod, MA, and Evanston, IL).”[67]  In addition, some state utility commissions also claim to provide incentives to telecommunications providers to provide high-speed services. 

Significant amounts of federal funding for broadband deployment also already exist.  A recently published report by the Congressional Research Service (CRS) identifies 16 federal programs that promote telecommunications deployment and advanced technologies.[68]  The CRS Report projected that support in 2001 for these programs would be approximately $1.2 billion in direct funding and $620 million in loans and loan guarantees,[69] in line with what has been considered by some “a consistent theme of generous federal spending on advanced technology for schools, libraries, and other community institutions.”[70]   For example, in its first three years of operation, $5.8 billion was awarded to eligible schools, libraries, and rural health care providers for telecommunications services and advanced services as part of the universal service support program.  Two additional primary sources of federal support for broadband deployment are the NTIA and the Agriculture Department’s Rural Utility Service (RUS).  Every year, NTIA provides grants for advanced services deployment to underserved communities through its Technology Opportunities Program (TOP).  A few months ago, the NTIA announced the award of $42.8 million in grants to 74 non-profit organizations, including state and local governments, across the country and in Puerto Rico, to extend advanced services to underserved communities.  These grants were matched by $46.7 million in contributions from the private sector and state and local organizations.[71]  Overall, approximately 65 percent of the NTIA grants go to projects in rural areas.[72] 

The RUS’s Telecommunications Program provides two sources of funding for advanced telecommunications infrastructure in rural America.  First, RUS provides loans for telecommunications infrastructure investment for commercial, non-profit, and limited liability companies that are providing telecommunications and advanced services.  Over the past three years, RUS’s loans have totaled $1.4 billion and provided more than 783,000 of the nation’s most rural households and businesses with the opportunity to subscribe to advanced services.  Second, RUS provides loans and grants for rural schools, libraries, and health clinics for advanced services deployment.  In June, the program awarded a total of $15 million to enhance learning and medical care opportunities for remote communities.[73] 

In addition to government-sponsored initiatives, private foundations also help to spur broadband deployment.  Microsoft founder Bill Gates established the Gates Library Foundation, which provides funding to bring the Internet to public libraries.  The Northern Virginia Technology Council announced last spring the creation of a charitable foundation to provide financing for community outreach initiatives to help bridge the digital divide.  The Council has set out to raise $10 million over five years to expand the reach of community-based technology initiatives.[74]  Private companies also find it in their own business interest to increase broadband deployment to underserved areas.  Comcast Cable has established “Cable Core Curriculum” to provide broadband access to economically disadvantaged communities and provide students in those communities with skills that they can use in high-tech careers.[75] The National Association of Minorities in Communications is working to bring more people of color into the “information age” through a partnership involving cable companies, broadband equipment manufacturers, and others.[76] AT&T has created an initiative in Southern California called “Streetseen.net” to help bridge the “digital divide” for kids.[77]  NCTA also notes that its members are generally working locally, often with partners, to help bridge the digital divide, since “no one approach fits every community.”[78] 

With regard to the question about whether there are areas of the country or persons that are unlikely to receive broadband service through the operation of marketplace forces, the answer is that it is too early to tell.  It may become evident at the appropriate point in time that some form of targeted programs are required to bring broadband service to certain parts of the country.  But for now, broadband technologies still are in their infancy and development stages, and there are serious questions surrounding consumer demand for broadband.  WorldCom recommended in its universal service comments that, in its periodic review of whether advanced services should be included in the definition of universal service, the Universal Service Joint Board should undertake an analysis that involves answering the following questions.  This list of questions was not intended to be exhaustive, but rather, to represent the key issues that regulators and policymakers must answer adequately before implementing universal service subsidies for advanced services.[79]  NTIA also may wish to consider these questions as part of its review:

·        Are advanced services being subscribed to by a substantial majority of residential customers?   What is the meaning of the phrase “through the operation of market choices by consumers?”

·        Are certain, identifiable segments of the population not subscribing to advanced services?  Why are these segments not subscribing?  Price? Availability of service? Little or no perceived value?

·        Are advanced services “essential” to education, health care, or public safety? If so, in what way? 

·        What are the market trends regarding adoption rates of advanced services? Have advanced services been adopted at a rate comparable to other technologies? Are there signs that the growth rate is slowing, and if so, why? 

·        If the federal government were to subsidize advanced services through universal service, what services would be subsidized?  How would “advanced services” be defined for universal service purposes?

·        What would the direct costs of any subsidization be? By how much would the size of the federal universal fund increase?  How would this affect carrier federal universal service line charges?  Would the costs outweigh the benefits?

·        What would the indirect costs of subsidization be, e.g., would the subsidies be technology and competitively neutral? How would subsidies affect competition?

·        What changes to the existing funding mechanism would need to be made?

·        What are the alternatives to federal subsidies, and would they produce equal or better benefits with less costs?  What about greater state and local government intervention? Community-based programs?  Increased incentives for private investment? Market forces?

·        If universal service support were provided for advanced services, how would the support levels be determined?  Would a cost model be necessary?

·        Is the addition of advanced services consistent with the ETC requirements of Section 214?  What waivers to ETC requirements would be necessary to provide for a competitively neutral universal service fund that included advanced services?

 

VI.       THE UNBUNDLING OBLIGATIONS OF THE 1996 ACT ARE NOT HARMING INCUMBENT PROVIDERS’ ABILITY TO COMPETE AGAINST OTHER BROADBAND PROVIDERS

 

Now that there is a good supply of broadband in the United States, some ask whether it is necessary to continue imposing unbundling obligations on the Bell Companies.  The key to maintaining growth and innovation in high-speed data services is competition, and there will not be competition if the existing rules are eliminated.  Competition spurs innovation and brings lower prices.

            Before the 1996 Act, there were no competitive data providers in existence and the ILECs were not offering DSL services.  While the Bells had ADSL technology, they chose not to deploy it, choosing instead to offer expensive fractional T-1 service to businesses.  A note published in the Federal Communications Law Journal on the dangers of the Tauzin-Dingell Bill appropriately captures the issue:

            The passage of H.R. 1542 [Tauzin-Dingell] would result in grievous setbacks for consumers best illustrated by the technological environment before the 1996 Act, a time when the BOCs enjoyed a local exchange service monopoly.  “It’s important to note that the Bells had DSL technology but did not offer it. Instead, they offered the more expensive ‘T-1’ lines to businesses”  “[I]ncumbents were selectively deploying only one form of DSL—called HDSL—and charging businesses upwards of $1000 to $1500 per month for this ‘T1’ service.”  The ILECs offered the significantly more expensive T1 service, despite the fact that “DSL technology has existed for more than 10 years.”  The ILECs’ lackadaisical attitude toward the rollout of fast, inexpensive technology changed dramatically with the introduction of competition into the local exchange market.  “[S]purred by this growing broadband competition, the incumbent carriers have responded with their own burgeoning DSL deployment.”  The provision of DSL service “now appears to be driven by the threat of competition.”  This competition has not only induced ILECs to deploy DSL, and to do it faster, “but where competition exists, it is also forcing the incumbent carriers to reduce their DSL charges to consumers.”[80]

 

One need not look any further than the price hikes by the BOCs after competitive data providers exited the DSL market as evidence of the harmful effects of the lack of competition in that market.  The Washington Post reported that the rise in broadband rates is due in part to the demise of competitive data providers: “After keeping rates flat for several years, several companies boosted their charges after several fledgling DSL service providers such as NorthPoint Communications Group, went out of business.”[81]  If the Bell Companies are permitted to continue to exploit their monopoly in the voice market to gain an advantageous position in the DSL market, we will continue to see higher prices for less-than-innovative services.

Some argue that there is competition in the broadband market because of cable.  While cable companies serve the residential market, they do not serve businesses.  Moreover, on the residential side, consumers currently face a duopoly: ILEC-provided DSL service and cable modem service.  On the business side, only competitors are serving businesses with DSL.  While there is considerable demand for broadband to businesses, especially for smaller and medium-sized businesses, and larger businesses with multiple campuses, numerous satellite offices and telecommuters, the Bells have no incentive to provide business-grade DSL service because it will cannibalize their considerable embedded base of higher-priced T-1 circuits.  Today, only competitors like Covad and WorldCom are serving these business customers with DSL. 

The Bells argue that, because the Commission does not regulate cable-based broadband service, their advanced services should similarly be exempt from unbundling obligations.  As Congressman Tom Davis (R,VA-11) explains in a letter to his constituents in response to the BOC argument that it cannot keep pace with cable deployment because of asymmetrical regulatory requirements:

Cable companies are not completely deregulated: they do face regulatory authority in their franchise agreements with local governments. In addition, the Bell companies built their networks over decades with a monopoly profit guaranteed by the government. Captive ratepayers paid for the Bells’ infrastructure, and in exchange for granting the Bell system a monopoly, the government mandated certain build-out requirements to help ensure affordable and universal phone service to every consumer. With a government-guaranteed monopoly rate of return, the Bells assumed no risk. In stark contrast, the cable companies build their networks in the 1980s using private capital with no guaranteed profit.  As well, I do not believe that a duopoly—where the only choices available to consumers are either the Bell Company or the cable company—translates into competition.[82]

 

            Finally, the unbundling rules that the Bells are seeking to escape for data are the same rules that apply to voice.  In seeking such relief from the FCC, Verizon proposes that “there would be no change in the UNEs a carrier providing voice service could obtain,”[83] just a change in the UNEs needed for data.  The Commission’s recent statistics on local voice competition show that competitors had less than 4% of lines in service at the end of 2000. Similarly, the Commission’s data on DSL deployment reveal that competitors had less than 8% of all ADSL lines in service for the same period.  The Bells’ arguments do not add up—they are the dominant providers of both voice and data—both services that rely on access to the loop.       

           

VII.     PRICING RULES ALLOW FOR RECOVERY OF INVESTMENT IN NEW BROADBAND INFASTRUCTURE

 

Access by competitors to unbundled network elements at cost is required because competition in the provision of network functions cannot develop rapidly for all network functions, and may not develop at all for other network functions. Where the cost structure of a network function is such that competition may develop, competitors will require time to deploy facilities and to develop the capability to provision that function to consumers.  In the meantime, access to the ILECs’ unbundled network elements will hasten the development of facilities competition by permitting competitors to develop a customer base. Where the cost structure of a network function is such that competition may not feasibly exist, because of the existence of economies of scale, a bottleneck monopoly function is controlled by the ILECs, and access by competitors to the ILECs’ unbundled network functions may be required indefinitely.  Under these circumstances, availability of the bottleneck network elements is the sine qua non of facilities-based competition.  Without access to the network elements that cannot be replicated profitably, the competitors will be effectively shut out of the market and invest nothing.

The incumbent LECs' control of essential bottleneck monopoly network functions provides them with the ability to engage in anticompetitive conduct to foreclose competition in downstream markets – i.e. those markets that are dependent on access to LEC-supplied inputs.  Left alone, an incumbent LEC can, does, and will, as competition begins to emerge, leverage that monopoly control in a variety of ways to benefit itself and disadvantage competitors.  The most direct way for the LEC to foreclose competition in downstream markets would be to deny competitors access to needed inputs.  The LEC could also leverage its monopoly in a less blatant manner by either setting above-cost prices on inputs sold to competitors, or by degrading the quality of the input.   In either case, the LEC would have an unfair competitive advantage in the downstream market. 

As a result of these actions, consumers would be deprived of the benefits of a vigorously competitive market.  Those benefits include a more rapid pace of innovation in the development of new products and services to meet consumer needs, increased efficiency in the provision of telecommunications services, and lower prices for those services.  In determining a methodology for the estimation of network costs to serve as a basis for establishing prices for the use of UNEs by competitive telecommunications service providers, the FCC was cognizant of the crucial role that the relationship between prices and costs would play in the development of competition. If prices for the use of UNEs were to be set above cost, the developing competitive market could be harmed in a number of ways.

If the price of a UNE is set above the underlying cost, the ability of competitive LECs to provide retail services to consumers may be impaired. Specifically, if the price charged for the required UNEs, plus the costs incurred by the competitive LEC in self-provisioning, exceeds the retail rate charged by the incumbent LEC for the same or similar service, then the CLEC will be unable to compete.  This would happen even if the CLEC is equally or more efficient than the incumbent in the components of the service for which it controls the cost.

Regulators have attempted to prevent monopoly leveraging by requiring the upstream monopolist (the LEC) to “impute” the tariffed rate for the monopoly inputs into the final price for the competitive downstream product.  These regulations have been cumbersome to enforce, in part because they require an analysis of the LEC’s costs of serving the downstream market in order to determine whether competitors are facing a price squeeze.   One-way of avoiding detailed analysis of the LECs’ activities in downstream markets is to set cost-based prices for the monopoly inputs used by competitors.

Even if the margin between the UNE price plus the CLEC’s own costs and the ILEC’s retail rate is sufficient to permit entry by the CLEC, consumers may be harmed if the UNE price is set in excess of economic cost. The gap between the economic cost and the price embeds an inefficiently high cost into the rate structure both of the incumbent LEC and the competitive LECs.  This occurs because the unbundled UNE is a monopoly bottleneck, hence there is no opportunity for the inefficiency to be reduced or eliminated through the action of a competitive market. This represents a deadweight loss of economic resources to society, and unjustly rewards the incumbent LEC at the expense of consumers and society as a whole.

Finally, a price for UNEs in excess of cost may encourage inefficient entry by CLECs in the provision of certain network functions that may more efficiently be provided by a monopoly carrier. Where a network function is subject to large economies of scale, competition in the provision of that function may not be economically efficient, because each competitor must incur large fixed costs to provide the function. In this case, the lowest cost to consumers will be achieved if only a single service provider incurs those fixed costs, thus avoiding duplication of this investment. If however, the price to competitors for use of the network function in question is sufficiently high, the competitor may be able to provide the function at a lower cost, while still not achieving the efficiency possible if a monopoly provider were to offer the function at a price equal to the cost of providing the function.  Policymakers who appear to believe that “more investment is always better” often ignore this point.  This is not good economic policy.  Investment in the wrong technology, or too much investment in the right technology, is wasteful and should not be encouraged by policies that either artificially stimulate investments or ignore market failures that force firms to build, when leasing is a more efficient practice.

The standard adopted by the FCC for determining the cost of network elements – Total Element Long Run Incremental Cost, or TELRIC – is the correct measure of cost for use in setting prices for UNEs. The methodology is designed to estimate the cost that would be faced by a new entrant providing the total range of network functions and services currently offered by the incumbent LECs’ using the most efficient currently available technology and an efficient network design. As such, it simulates the costs that would be recoverable by any participant in a competitive marketplace. Competitive markets do not necessarily permit all participants to recover all of the costs incurred in providing products or services in the market. If a current participant faces entry by a new competitor that is able to achieve greater efficiency by using more efficient technology, or by operating in a more efficient manner, the incumbent is forced to reduce costs either by adopting the newer, more efficient technology, or by otherwise reducing its costs to permit it to meet the price established by the new entrant. By estimating the cost faced by a new entrant, the TELRIC methodology permits a view to the costs (and prices) that would prevail in a competitive marketplace, even where certain aspects of the ILECs’ local exchange market are not subject to competitive entry.

The likelihood that certain investments may not be fully recovered due to the operation of the competitive process represents the risk faced by any participant in a market. For this reason, the TELRIC methodology adopted by the FCC includes a risk-adjusted cost of capital and projected depreciation life applicable to each category of equipment used by the ILECs in providing each network function. Some components of the telecommunications network use stable technology and are not subject to competitive entry in the near term. For these categories, a relatively low cost of capital and longer depreciation life is justified. Other components of the network are subject at the present time to rapid technological innovation, or may be subject to near-term competitive entry. For these components, a relatively higher cost of capital and shorter depreciation life is justified. In either case, the TELRIC methodology is capable of recognizing the actually cost of capital and will provide the correct incentive for the ILEC to make investments in the network – absent any anticompetitive goals.  Indeed, as the FCC recently explained to the Supreme Court of the United States:

TELRIC is designed to compensate incumbents for their full forward-looking costs of providing network elements; to enable competitors efficiently to enter the market and to acquire expertise, capital, and a customer base, while providing incentives for them to construct their own facilities where doing so makes economic sense; and ultimately to afford consumers the benefits of retail rates that reflect competitive market pricing.[84]

Because the TELRIC methodology ensures that prices established for the use of UNEs include an adequate return on investment, the ILECs’ claim that an unbundling requirement will deter their investment in broadband facilities should be recognized as a thinly veiled attempt on their part to earn monopoly rent.  No one can dispute that, in the absence of such an unbundling requirement, the ILEC would be able, through its control of monopoly bottleneck facilities, to exact a higher price to consumers for the services made possible by investments in broadband technology. This in turn would result in a higher rate of return on those investments. The question is whether public policy should permit the extraction of monopoly profits in return for the ILEC’s investments in broadband technology, or whether instead the rate of return included in the price for UNEs charged to competitors should be set at a level which provides a competitive rate of return to the ILECs, without permitting the ILECs to derive excess profits from their control of essential facilities.

It is not at all clear that the investments that must be made by the ILECs in support of broadband services differ substantially from other network functions in terms of the risk incurred by the ILEC. Investments in the electronics needed to enable DSL services on existing copper loop plant, or to enable DSL services and increase capacity on modern DLC systems, are scalable (they increase directly as the number of subscribers increases, without undue “lumpiness”) and are fungible (if electronic equipment deployed in one location is not needed to meet existing demand, it can deployed elsewhere). This situation obtains for the vast majority of potential broadband customers. In those few situations where additional investment in fiber optic transmission cable and supporting electronics is required to provide DSL service, that investment is not similarly scalable and fungible, evidence suggests that investment in this plant component may be justified whether or not demand for broadband services grows.  SBC reports that its Project Pronto initiative will “dramatically reduce its network cost structure” and that “expense and capital savings alone are expected to offset the cost of the entire initiative.”[85]

The Bells claim that regulations are impairing their ability to invest in upgrades to their networks that will deliver broadband to consumers in rural areas.   This argument is misleading and unsubstantiated.  First, the Bells do have an incentive to expand the reach of their broadband networks.  In many states, the ILECs are receiving subsidies in exchange for the promise of broadband deployment to rural areas.  In addition, the Bells acknowledge that it is more efficient for them to push fiber deeper into neighborhoods to accommodate both voice and data traffic. 

In exchange for price cap regulation in Pennsylvania, Verizon has an obligation to deploy advanced services throughout the state. Similarly, in New Jersey, Verizon’s Alternative Regulatory Plan was conditioned upon a commitment by Verizon to deploy full broadband capability by the year 2010.  Likewise, Verizon has agreed to invest in at least $375 million to upgrade its telecom infrastructure in West Virginia, in exchange for a five-year incentive-based alternative regulation plan.

Threats by the ILECs that they will curtail investments in broadband services unless broadband services are exempted from unbundling requirements are not only belied by the available evidence on their own deployment of facilities to provide these services, they are, as the Texas Public Utility Commission recently found, indicative of the market power enjoyed by the ILECs in this area:

Finally, the Arbitrators are troubled that SWBT has espoused the position that if the Commission determined that Project Pronto is required to be unbundled pursuant to 251, SWBT might be forced to reconsider its investment in rolling out its broadband product.   This position, in and of itself, provides clear and convincing evidence that SWBT continues to possess market power and can unilaterally determine who receives, and far more compelling, who does not receive broadband services.  Notwithstanding the Arbitrators‚ earlier analysis that SWBT should be required to provide CLECs with access to Pronto functionality based on the factors outlined by the FCC, this statement provides additional support that meaningful competition can only be accomplished by allowing CLECs access.  If one company, in this case, SWBT, can unilaterally determine when and if citizens receive broadband service, it is up to this Commission to continue fostering competition by requiring element unbundling when clearly supported by evidence.  Such is the case here.[86]

There is no question that some investment in local loop facilities must be made by the ILECs to enable broadband services. In some cases, where the basic loop infrastructure must be upgraded, these investments can only be made by the ILEC, due to the large economies of scale present in the loop portion of the telecommunications network. In other cases, where existing loop facilities can be used in the provision of broadband services, CLECs are capable of making the investments in the technology needed to enable broadband access, given access to collocation in ILEC wire centers at reasonable rates, and given access to operations support systems and other mechanisms necessary for the efficient provisioning of service.

It is clear, however, that denial to CLECs of the means necessary to provide broadband services will result in the monopolization of those services by the ILECs, to the detriment of businesses and retail consumers. The monopolization of this market would result only in higher prices and a slower pace of innovation than otherwise would be the case. It should be small comfort to consumers or to policymakers that the ILECs do not challenge existing unbundling requirements applicable to voice services. Given the increasing integration of broadband Internet services and other forms of communication, including voice telephony and video transmission, the maintenance of unbundling requirements for narrowband services may soon become the “sleeves of a vest,” as all forms of communication increasingly migrate to the Internet platform.

 

VIII.    BOC DOMINANCE OF DSL IMPACTS ISPs

One important result of BOC dominance of the DSL market is the impact on independent Internet service providers (ISPs).  By some counts there are over 7,000 ISPs in the United States, from giants like AOL and Earthlink to smaller regional companies like Toadnet.  Over the past ten years, innovative ISPs have helped drive the tremendous growth of the Internet, competing for residential and business customers alike in a robustly competitive market.  While the recent shakeup in the dot com business has thinned the ranks to some degree, nonetheless end users still are able to choose from dozens to hundreds of ISPs to connect to the Internet from their home or business.

As broadband deployment reaches all corners of the country, and take-rates continue to rise, ISPs have an understandable business interest in giving their customers access to broadband technologies and services.  At present there are but two broadband platforms available with the near-ubiquitous reach ISPs require – cable modem service and DSL service.  Given the FCC’s staunch refusal to require the major cable companies to open up their modem platforms to CLECs or ISPs (excepting FTC merger conditions that benefit only the major ISPs), DSL is the only realistic alternative remaining.  Unfortunately, the FCC’s DSL policies leave little room for most ISPs to survive in the broadband world.

ISPs seeking to provide DSL currently have two options: partner with a DLEC, or partner with an ILEC.  As has been described above, however, the ILECs control between 85 and 92 percent of the DSL lines.  Only two national competitive DSL providers, Covad and WorldCom, have survived the implosion in the telecom market, and their coverage of the United States is not nearly as extensive as the ILECs’.  Should the FCC decide to further deregulate the ILECs, by removing key unbundling, line sharing, and other pro-competitive requirements, it is unclear to what extent the DLECs will be able to compete effectively against the ILECs.

With the ILECs dominating the DSL market, the ISPs generally have looked to them to supply DSL capability.  Despite the fact that Computer III rules now in place require the incumbents to provide resold telecom services and equal access to underlying facilities, and prohibit discrimination and cross-subsidies,[87] ISPs have experienced little success dealing with the ILECs.  In California, for example, ISPs have protested against an SBC DSL contract that they have shown discriminates unlawfully against them in numerous ways.[88]  That protest is now before the California Public Utilities Commission.[89]  Similarly, at the federal level, ISPs have protested SBC’s recent DSL tariff, which includes terms and conditions that allow SBC to place other applications over the same line carrying the ISP’s wholesale DSL transport service.[90]  WorldCom has complained that SBC’s reservation of the right to place other advanced services directly over the DSL line carrying the ISP’s service constitutes and unreasonable practice and results in an excessive charge for a diminished service. 

When left unchecked, the ILECs will leverage their control over last mile facilities to drive independent ISPs out of the market.[91]  Indeed, SBC boasts that 80 percent of its DSL customers also use SBC as their ISP.[92]  Should the regulators fail to enforce existing pro-competitive rules, allowing the ILECs to succeed in their mission to control collectively the local voice, data, and enhanced markets, consumers ultimately will suffer.

IX.       POOR SPECIAL ACCESS PROVISIONING BY THE BOCs DEPRIVES BUSINESSES OF INNOVATIVE COMPETITIVE OFFERINGS

 

Special access is a key vehicle for the provision of broadband services to medium and large businesses. The FCC has issued a Notice of Proposed Rulemaking on the need for federal performance measurements and standards for evaluating incumbent LEC performance in the provisioning of special access.[93] The Notice was released in response to concerns expressed by a broad range of competitors that the provision of special access by the Bell Companies is discriminatory.  The New York Public Service Commission conducted its own investigation of Verizon’s special access provisioning performance and found evidence of discrimination that left unchecked could undermine competition in the state.[94] 

The long provisioning intervals offered to competitors by the BOCs deprive medium and large businesses of innovative competitive offerings. Competitors, including WorldCom, fear that as the BOCs gain 271 entry, they will have the potential to discriminate against other carriers in the provision of these important upstream facilities. 

X.        THE GOVERNMENT SHOULD SUPPORT POLICIES THAT ENCOURAGE THE DEVELOPMENT OF WIRELESS ALTERNATIVES FOR BROADBAND ACCESS

 

WorldCom has made a significant investment in providing Multi-Channel Multi-Point Distribution Service (MMDS), a wireless broadband service that provides a facilities-based, last mile competitive alternative to DSL and cable broadband services.  MMDS is particularly well suited for coverage of suburban and rural areas.  WorldCom currently holds MMDS licenses covering more than 31 million households in over 100 markets, and is already providing MMDS broadband service in many small and mid-sized markets, including  Bakersfield, CA; Baton Rouge, LA; Chattanooga, TN; Jackson, MS; Memphis, TN; Montgomery, AL; Tallahassee, FL; Lafayette, LA; Pensacola, FL; Hartford, CT; Springfield, MA; Minneapolis, MN; and Kansas City, MO.  WorldCom also provides Local Multipoint Distribution Service (LMDS), another type of wireless broadband communication system, on a resale basis and currently has several large customers for this service.

WorldCom supports policies that encourage the development of wireless

alternatives, which will promote rapid deployment of broadband service to all Americans, not just to those who live in the largest population centers.  It is imperative that the U.S. government preserve and protect fixed wireless service in all frequency bands to the fullest extent possible, so that physically diverse, facilities-based alternatives remain readily available to serve the public.

XI.       RIGHTS-OF-WAY RESTRICTIONS SERVE TO DELAY THE DEPLOYMENT OF BROADBAND

 

            In order to provide any telecommunications service, either narrowband or broadband, telecommunications companies must be able to bring their signal to the end user.  For facilities-based wireline companies, this means placing their cables within public rights-of-way.  The ability of telecommunications companies gaining access to public rights-of-way at non-discriminatory terms and conditions, cost-based rates, and in a timely fashion, are critical conditions for their ability to deploy their own broadband networks.  Sadly, since the passage of the Telecom Act, CLECs have been hampered in their ability to install their facilities by a rash of overly regulatory municipal ordinances that have sought to: impose excessive, non-cost based fees; regulate the provision of telecommunications service; and impose delays unrelated to the management of public rights-of-way through unnecessary and cumbersome application procedures and bonding requirements.

            A.        Municipal Rights-of-Way Practices Have Reduced The Rate At Which CLECs Have Deployed Broadband Facilities

 

Congress passed the Telecommunications Act of 1996 in order to promote competition and reduce regulation at all levels, including the municipal level.  Section 253 prohibited state or local statutes or regulations from acting as a barrier to entry by telecommunications companies.[95]  Congress did reserve to municipalities the authority to manage public rights-of-way, provided they did so in a competitively neutral, non-discriminatory fashion; and provided they imposed reasonable compensation for the use of public rights-of-way.[96]  However, many municipalities have viewed facilities-based competitive entry as an opportunity to maximize revenues available to city budgets.

In response to numerous complaints by CLECs that municipalities were improperly using their Section 253(c) authority to inhibit facilities-based competition, the FCC opened a Notice of Inquiry on municipal rights-of-way practices two years ago.[97]  In that proceeding, CLECs documented the barriers to entry erected by municipalities.  CLECs identified three basic types of problems:  1) burdensome requirements unrelated to right-of-way use that amount to municipal regulation of telecommunications, 2) unreasonable requirements related to right-of way use that amount to a failure to negotiate in good faith or in a timely fashion, and 3) unreasonable, discriminatory, fee methodologies and fee amounts.

            1.         Burdensome Application, Franchise and Operating Requirements Unrelated to the Use of Rights-of-Way

 

Many municipalities require entrants to disclose detailed financial and operating information, such as the identity of customers they serve, services they provide, capacity of facilities they utilize to serve customers, company revenues, number of customer complaints, operation repair statistics, copies of FCC, SEC, and IRS filings, and rates they intend to charge customers.[98]  A number of municipalities have imposed unreasonable conditions in the event a company terminates service, including for example, requiring sale, or even forfeiture, of company assets to the municipality.

These filing requirements amount to municipal regulation of competitive telecommunications companies.  CLECs have contended that these practices amount to a regulation of their business rather than the administration of municipal rights-of-way, and therefore go beyond their Congressional rights-of-way authority.  Courts have agreed with appellants.  Thus, in the City of White Plains, (125 F. Supp. 2d at 92) the Court said that a city’s right to “inspect [] … records and requir[e] the carrier to maintain complete and accurate records must be limited to information necessary to enforce its rights-of-way regulations and to ensure that it has received accurate fee information.”  Similarly, in the City of Auburn, (247 F. 3d at 982), the court ruled that a city may not evaluate the “financial soundness, technical qualifications, and legal ability to provide telecommunications services.” 

In general, after years of litigation, courts agree that cities may not exercise unfettered discretion to insist on unspecified franchise terms or to deny or revoke franchises based on unspecified factors.[99]  Adoption of clear,  pro-competitive, national rights-of-way principles soon after passage of the 1996 Act, and a willingness to enforce it, could have saved entrants years of litigation, and resulted in significantly more rapid and extensive competitive entry, along with the additional provision of broadband capacity fostered by this entry.  There is still reason to adopt such principles, since many municipalities are not familiar with the Court decisions and persist in applying rights-of-way policies that would be found to be in violation of these decisions.  WorldCom recommends the Administration adopt a policy principle opposing local franchise or construction permit requirements unrelated to right-of-way use, including:

·        Regulating rates, or merger conditions,

·        Certifying financial, technical, or legal qualifications,

·        Requiring customer service requirements,

·        Requiring carriers to waive federal or state rights,

·        Requiring carriers to offer municipalities access to their facilities or services for free or at most favorable rates,

·        Requiring carriers to forfeit their facilities when their rights-of-way agreement expires, and

·        Failing to give carriers a window of time to resolve disputes before rights-of-way agreements are terminated for cause.

 

2.         Unreasonable Conditions on the Use of Right-of-Way That Amounts To An Unreasonable Delay Of Entry

 

            Municipalities have also sought to impose unreasonable conditions on the use of rights-of-way by new entrants.  For example, requiring entrants to identify routes they intend to occupy reasonably flows from a city’s authority to manage right-of-way use.  However, demands for satellite mapping of intended routes, a condition required by one municipality, amounts to an unreasonable requirement.[100]  Some cities have required engineering certification of routine activities in rights-of-way, such as maintaining a line drop, when no intrusion into streets is involved whatsoever.  Such certification goes beyond generally accepted engineering requirements, and so is an unreasonable right-of-way practice, amounting to delay.

Some municipalities have found ways to delay installation of CLEC facilities by delaying construction permits until companies post construction bonds that are either excessive or unclear.  WorldCom was required to submit construction bonds to Prince Georges County three times before it was able to determine what the County required, resulting in a six month delay in construction. 

Just as courts have rejected burdensome requirements unrelated to rights-of-way management, Courts have generally found that unreasonable requirements related to rights-of-way management, such as excessive delays and excessive bonding and insurance requirements amount to a prohibition on entry, and therefore violate Section 253(a) of the 1996 Act.[101]  As above, this outcome has taken years of litigation, and has resulted in significant delay in the installation of competitive facilities, both broadband and narrowband.

As with burdensome franchise requirements discussed above, LECs and municipalities alike would benefit from adoption of a national policy principle that draws a clear line between reasonable and unreasonable rights-of-way operating conditions.  In this regard, WorldCom urges the Administration adopt a principle opposing unreasonable operating requirements, including:

·        Excessive, complicated, unclear indemnification requirements,

·        Engineering and construction requirements that go beyond generally accepted standards, or exceed generally applicable zoning, building, and safety codes,

·        Failing to respond to an application to construct facilities within 30 days of the application, and

·        Failing to permit construction to begin after 30 days after application, while clarifications and negotiations continue.

 

3.         The Administration Should Promote Reasonable, Non-Discriminatory, Right-of-Way Rates and Rate Methodologies

 

Many cities require excessive and unreasonable fees before granting entrants the ability to install their facilities in public rights-of way.  Most common is the establishment of annual right-of-way fees based on a percent of a company’s revenues.  Some cities have required companies to provide free fiber, free conduit, free computers, and other in-kind services, while others have required companies to agree to “most favored nations” clauses, which guarantee a city will get the best available fees and terms.  Courts have consistently found requirements to provide in-kind services to be unrelated to their management of rights-of-way and therefore outside municipal Section 253(c) authority.[102]

Courts have mostly found fees unrelated to a carrier’s actual use of right-of-way (e.g. fees based on the percentage of revenues) to be unreasonable.  One court found that fees must be reasonably calculated to cover the “costs [to local governments] of administering their franchise programs and improving their public rights-of-way.[103]  Another has held that franchise fees must be “based on the costs of maintaining the right of way.”[104]  Another has held that franchise fees unrelated to a city’s cost of maintaining local rights-of-way are prohibited under Section 253.[105]  Courts have generally concluded that Section 253 only permits fees that are directly related to the carrier’s actual use of the right-of-way.[106] 

Courts have extended this principle to explicitly reject the practice of calculating fees as a percent of carriers’ revenues on the arguing that the proper standard is not the value of a carrier’s privilege using public right-of-way, but instead the cost directly related to its use.[107]  Cities are not entitled to charge rent, i.e. to maximize revenues from a scarce resource, because they do not “own” right-of-way as a private property owner owns their property.  Municipalities have been granted stewardship of local rights-of-way from their respective states and are generally required to manage this right-of-way on behalf of the public, which includes CLECs seeking.  However, a few Court cases have held that cities may charge “rent” for the use of public rights-of-way, arguing that the right to be fairly and reasonably compensated in Section 253(c) is not limited to a cost basis.[108] 

            Because judicial opinion is not uniform about whether cities may impose fees on carriers not directly related to their use of right-of-way, the Administration should take this opportunity to adopt a national policy promoting cost-based fees directly related to the use of rights-of-way.  Some specificity is required in order ensure that cost-based fees do not act as a barrier to facilities-based entry. 

In its Notice Requesting Comments, The Administration asks whether rights-of-way fees should “…reflect costs in addition to the direct administrative costs to the municipalities affected.”[109]  First, the Administration should clarify that permissible right-of-way administrative costs are limited to the costs directly associated with permitting, traffic management, and street repair coordination.  As discussed above, many cities have constructed elaborate financial, facilities, and service disclosure requirements unrelated to a carrier’s use of the right-of-way.  Were review of these reports to be permitted, carriers would face the double barrier of costly delays, coupled with the need to reimburse cities for privilege of being subject to application procedures outside municipalities’ Section 253(c) authority.  The Administration should make clear that it only supports administrative costs related to permitting, traffic management, and street repair coordination.  The Administration should reject including costs associated with the review of a carrier’s financial assets, revenues, facilities, services, complaints, or any other regulatory matters conducted by existing, authorized regulatory entities.

Second, the Administration should adopt the rate design principle that right-of-way fees should involve a one-time non-recurring fee, based on direct, observable, incremental costs.  Recurring rights-of-way fees are not economically justified.

Third, the Administration should adopt a policy that rights-of-way fees based on a carrier’s revenues and other benchmarks unrelated to the nature and extent of rights-of-way accessed by carriers are unreasonably discriminatory, and therefore a violation of Section 253(c).  It is commonly accepted in the field of utility regulation that the same fee charged to entities causing different costs is unreasonably discriminatory.  Conversely, charging different fees for essentially the same cost causation (as can occur when fees are based on percentage of a carrier’s revenues) is also unreasonably discriminatory.

The Administration asks to what extent does state laws and regulations limit municipalities’ ability to establish nondiscriminatory charges for use of the public right-of-way?  WorldCom’s experience, documented in these comments, is that most of the discrimination is coming from municipalities who seek to charge fees based on a percentage of a carrier’s revenues or other non-cost based measures.  In response to the delays in competitive entry resulting from discriminatory and unreasonable rights-of-way fees, many states have adopted legislation explicitly limiting municipal right-of-way authority to what Congress intended in Section 253(c). 

WorldCom urges the Administration to support non-discrimination and cost-based rate setting for rights-of-way access whether municipalities, states, or the federal government promulgates them.  There may be instances where a state or the federal government has adopted discriminatory, revenue-maximizing, rights-of-way policies.  Those policies should not be supported.  WorldCom urges the Administration to be “jurisdiction blind” when it comes to unreasonable rights-of-way policies.

In that regard WorldCom urges the Administration to reject the recommendations contained in a Draft Report Issued by the National Oceanic and Atmospheric Administration (NOAA) because they advocate discriminatory and unreasonable  rights-of-way fee setting policies.[110]  In that draft report, NOAA recommends the adoption of a methodology for setting fees for carriers that access federal rights-of-way at the level that maximizes revenue payments from such carriers.[111]  NOAA contemplates a fee methodology that is not cost-based.  Carriers uniformly support the concept that they should reimburse right-of-way managers for costs caused by their incursion into public rights-of-way.  But a fee methodology that strives to maximize the revenues from each carrier that desires to access the right-of-way will result in fees based on the value of that access to each carrier.  This fee setting methodology produces fees that only by chance bears any relation to the costs caused by individual carriers accessing federal rights-of-way, and as such is discriminatory.

B.        Section 253 of the 1996 Act Captures the Proper Relation Between Federal and Local Governments

 

Congress was jurisdiction blind when it adopted Section 253 of the 1996 Act.  It authorized local authorities to manage public rights-of-way, but granted federal authorities the power to preempt any local policies that were discriminatory, not competitively neutral, unreasonable, and acted as a barrier to competitive entry.  Congress envisioned a relationship between federal and local rights of way authorities whereby federal authorities would set clarify with some specificity the meaning of “discrimination,” “competitive neutrality,” “unreasonable fee,” and “entry-inhibiting practice, ” and local authorities would apply these terms to local conditions. 

Unfortunately, the need for carriers to pursue numerous court actions against municipal rights of way policies testifies either to the lack of clear federal guidelines, unwillingness of the federal authorities to enforce their guidelines, the willful disregard of those guidelines by municipalities, or lack of knowledge of those guidelines by municipalities.  All of these possible lacunae will be at least partially remedied if the Administration were to adopt a set of national rights-of-way policy positions akin to those advocated in these comments.  Such a policy would serve to educate local authorities about the limits of their authority, reduce conflict and confusion that exists between carriers and municipalities, and serve to accelerate the approval of construction permits.

XII.           A NATIONAL SET OF RULES PROHIBITING UNREASONABLE BUILDING ACCESS REQUIREMENTS IS NEEDED

 

WorldCom urges NTIA to ask the Bush Administration to keep telecom competition on track by taking the lead in eliminating the barriers competitive service providers face in gaining access to tenants in multi-tenant environments (MTEs).  NTIA should recommend that the Administration establish rules that remove the disincentives for competitive service providers to make facilities-based investments in the advanced services market.  Further, NTIA should recommend that the Administration take positive steps toward non-discriminatory access in federal buildings.  Lastly, NTIA should establish a national set of rules for the states to follow that ensure reasonable and nondiscriminatory access to tenants in MTEs.

On October 25, 2000, the Federal Communications Commission (FCC) issued a Report and Order in the Competitive Networks proceeding that established certain requirements to increase competitive telecommunications options for tenants in multi-tenant environments (MTEs).[112] The Competitive Networks Order prohibited new exclusive contracts between building owners and local exchange carriers (LECs), clarified that CLECs have the right to use conduit still owned by the incumbent LECs, and in certain circumstances (e.g., when a building owner has not established a single point of entry), the right to lease ILEC intrabuilding wire as an unbundled network element.  However the Commission failed to go far enough in its efforts to ensure that all telecommunications service providers have non-discriminatory access to multi-tenant buildings. The Commission refrained from actively promoting non-discriminatory access to MTEs out of concern it did not have the needed jurisdiction over building owners. The Commission instead chose to rely largely on market forces, believing that the evolving market for the provision of telecommunications services in MTEs would even the playing field. 

In the year and two months since the release of the Competitive Networks Order, competitive telecommunications service providers have continued to experience difficulties in obtaining non-discriminatory access to MTEs. Many MTE owners still seek to exploit their ability to control which telecommunications service providers have access to their tenants by imposing unreasonable and discriminatory terms and conditions on competitive service providers.  These MTE owners are able to restrict tenants’ choice of telecommunications service providers by charging competitive service providers excessive fees to access equipment space, by delaying negotiations with competitive service providers, and by denying competitive service providers access altogether.  It is now clear that market forces alone will not ensure competitive service providers timely, reasonable, and non-discriminatory access to enough MTEs to permit competitive service providers to implement a viable business plan. In fact, it is apparent that current market characteristics create devastating barriers to entry and limit competitors’ business opportunities.

Given the current barriers to building access, new action is needed to eliminate barriers to remove the disincentives for competitive service providers to make facilities-based investments – including investments in advanced services. WorldCom has advocated that the FCC has ample authority under existing law to address this issue. However, new legislation would unambiguously establish the FCC’s jurisdiction.

While some state commissions and state legislatures have adopted non-discriminatory building access requirements, the majority has not.  Thus, in most states, competitors are left without building access remedies. Even in the states where landlords are required to grant competitors non-discriminatory access to MTEs, these requirements can be rendered ineffective by the operations of nationwide property management companies.  For example, multi-state landlords can pressure competitive service providers not to exercise their rights in one state out of fear these service providers will be denied access by that landlord in another state.

The difficulty competitors have in gaining access to MTE environments both delays their ability to provide advanced services and raise their cost of doing so.  The Bush Administration should urge legislators and regulators to establish rules to remove the disincentives for competitive service providers to make facilities-based investments and eliminate the barriers to advanced services deployment. NTIA should ask the Administration to take very positive steps towards non-discriminatory access in the buildings where it is the landlord and where it is a tenant.  To that end, NTIA should urge the Administration to adopt a model lease based on non-discriminatory principles. In addition, NTIA should establish a set of national rules for the states to follow that prohibit unreasonable and nondiscriminatory MTE access requirements. True competition in the advanced services market cannot exist until all customers—residential and commercial--are freely able to choose the service provider best able to support their needs.

A.        Current Market Characteristics Create Devastating Barriers to Entry and Limit Competitors’ Business Opportunities

 

In item G, NTIA asks what market characteristics must exist for competitors to make facilities-based investments, and whether competitors have the ability to deploy their facilities in ways that minimize costs and facilitate efficient network design.

The ILECs enjoy a tremendous economic advantage over competitors in serving these tenants. The ILECs are in virtually every building. In most cases, they do not pay for access to the MTE. ILECs generally operate without the need of a lease and are not required to make either one-time or ongoing payments to landlords. Moreover, they have not made their own entrance access, conduits, riser cable, inside wiring, and other rights-of-way for MTEs available to competitive carriers on reasonable and non-discriminatory terms, nor have they made their contracts with MTE owners routinely available so that competitive service providers can make informed decisions about the extent of access that can be obtained through existing ILEC agreements.

On the other hand, competitive service providers are often denied access to buildings by landlords or are asked to comply with unreasonable conditions for access or pay unreasonable fees or high rents for access. For example, MTE owners often demand a portion of competitors’ gross revenues – averaging anywhere from three to seven percent – as a condition for MTE access. In some cases, MTE owners often require competitors to pay a fixed monthly rent (typically, square footage multiplied by a negotiated dollar amount) in lieu of or in addition to a percentage of revenues. ILECs typically receive access to these MTEs without paying any rent at all. Moreover, MTE owners often demand a substantial one-time, non-refundable fee (e.g., $50,000 per entrance) or an up-front deposit equal to up to several months' payments. No similar requirements are imposed on ILECs as a condition of MTE access.

Landlords are economically able to delay access to competitors in the hopes of extracting maximum access fees because ILECs have gained nearly ubiquitous access. Landlords reason that if competitors refuse to pay fees that are discriminatory, and therefore do not provide competitive service, tenants will still be able to obtain service from the ILEC. The discriminatory rates and terms that ensure ILECs ubiquitous access simultaneously reduce competitive entry. These obstacles harm competitive service providers’ marketing, deployment, customer satisfaction, and network efficiency.

The effects of MTE owners’ discriminatory practices are now clear for all to see. Many competitors made facilities-based investments (e.g., put in their own loops, switches, etc.) and are now in bankruptcy. In the past year, nearly one and a half dozen providers of advanced telecommunications capabilities have declared bankruptcy, a number have been delisted from the NASDAQ, and many have closed down completely. Moreover, since June of 2001, thirty-one competitive service providers have applied to the FCC for authority to discontinue services in part or all of their territories. Even among those that have not filed for bankruptcy, the financial impact has been staggering. Across the spectrum of business plans, target markets, geography, technology, and financial capability, competitive service providers are failing in record numbers.

B.        Worldcom’s Business Opportunities Continue To Be Limited By Discriminatory Access To MTEs

 

Since the passage of the Telecom Act, WorldCom has invested tens of billions of dollars in order to offer competitive local exchange services using all of the entry vehicles contemplated by the 1996 Act. To this end, WorldCom has sought to provide such service over its own facilities, whether via fixed wireless or its own fiber facilities. Yet, even as a facilities-based provider, WorldCom cannot provide competitive local exchange services – including advanced services -- without obtaining prompt, non-discriminatory access to MTEs.

To properly serve advanced services customers, WorldCom typically needs significant point-of-presence (POP) space to place its electronic equipment. Due to high rent demands or substantial increases in rental rates made by landlords, WorldCom has been forced to decommission its POPs in several buildings across the country.[113] For instance, WorldCom was forced to decommission a POP in a building in Century Park in Los Angeles when the landlord has increased the rent of $750 to $1,000 per month during the term of the agreement. The landlord further notified WorldCom that he would increase the rent to $1,650 per month during the renewal term since, according to the landlord, other buildings in the area were getting $2,950 per month. In fact, however, the current comparable market rate for similar buildings in the area was well below $750 per month.[114]

WorldCom has been forced in a number of buildings to collocate, rather than put in a POP, due to landlords’ refusal to negotiate reasonable rates.[115] For example, in a building in Los Angeles, WorldCom was forced to move equipment into a collocation arrangement to serve a customer due to the landlord’s refusal to negotiate reasonable rates. Due to space restraints in the collocation space, WorldCom was not able to put in all of the circuits the customer needed and had to advise the customer to place the remainder of its order with the ILEC.

WorldCom has had to walk away from several buildings this year because of landlords’ high rent demands. For example, WorldCom was forced to cancel a project in Northern Virginia primarily due to landlords’ unreasonable demands. The landlord wanted WorldCom to pay $750 per month, plus annual escalations, for the right to pull one cable to the customer and refused to negotiate this figure. Even under a collocation scenario, serving the building would not have been profitable for WorldCom.[116]

WorldCom currently serves customers in several buildings where issues with the landlord regarding contract renewal terms remain unresolved. As a result, WorldCom is unable to renew these contracts and is in danger of being evicted, being unable to serve the customer or being forced to strand capital assets. For example, after extended negotiations, WorldCom finally agreed to double its rental payment to $20,000 annually and signed a contract sent by the landlord of a building in Boston, Massachusetts. The landlord subsequently reneged and refused to countersign, demanding instead that the rent double again to $40,000 annually -- a 400% increase. WorldCom refused, since the $20,000 fee would have been the highest rent in Boston. WorldCom has now been told to expect an eviction notice. In contrast to the escalating fees that landlords expect WorldCom to pay, the ILEC continues to gain access to buildings free of charge.

In some cases, the landlord creates a Meet-Me-Room (MMR) in a building, through which all service providers seeking to serve customers must connect, often at rates that bear no relation to the cost of interconnection. [117]  For example, WorldCom has a license agreement for a building in Buffalo, New York  -- an agreement that is in good standing. In spite of this agreement, the landlord is requiring WorldCom to use the MMR, at an additional fee, even though WorldCom’s agreement permits it to meet in the MMR at no additional fee and has the right to make direct connections to its customers.

 

In addition, it is often the case that the capacity of the MMR facilities is below the amount needed by WorldCom to supply its most advanced services.  Moreover, requiring all competitors to interconnect at a single point eliminates the redundancy required by many customers interested in purchasing broadband services.  In addition, requiring competitors to rely on inside wire maintained by the landlord’s agents makes it difficult for broadband providers such as WorldCom to maintain service level agreements with customers.  For example, in some of the buildings WorldCom serves, landlords often refuse to set reasonable time frames for letting WorldCom begin work to serve a tenant once a contract is negotiated. WorldCom has service level agreements that obligate us to begin service within two weeks after a contract is negotiated, but we often have to wait months after a contract is negotiated before getting permission from the landlord to perform actual upgrades and/or installation work.

In several buildings, WorldCom is paying rent, yet is being stopped by landlords’ high fee demands or restrictive conditions from doing work to upgrade its systems or install more capacity. For example, the landlord of a building in Milwaukee, Wisconsin demanded $1,200 per two inches of space per riser per month. This fee was in addition to the price per square foot for the floor space. WorldCom was seeking to provide service to a large customer who needed redundancy. Not only would the landlord not agree to reduce the $1,200 per month fee, but also would not agree to allow WorldCom make both runs in the risers for the $1,200 fee for this one customer.[118]

In most of these cases the landlord will not allow WorldCom’s engineers to install a new “fiber riser” model for lighting new buildings which would cut down on the costs of cable pulls and associated rates.[119] These landlords are insisting that fiber be placed in conduit, which makes the technology much less cost-efficient.[120]

C.                 NTIA Should Urge The Bush Administration To Establish MTE Access Rules That Enable Competitors To Make Facilities-Based Investments

 

These examples show that legislators and regulators must establish rules that ensure that all telecommunications service providers have non-discriminatory access to MTEs. Rules prohibiting discriminatory treatment of competitors would reduce negotiation costs for property owners and enable competitors to make additional investments in advanced telecommunications facilities. Rules that promote competition among providers would produce significant reductions in telecommunications prices and better service quality for consumers.

 

D.        There Are Impediments that Thwart Broadband Deployment in Federal Buildings and Proposed Solutions

 

In item M of the Notice, NTIA asks (i) whether there are any impediments to federal lands and buildings that thwart broadband deployment, and if so, for commenters to provide specific data, and (ii) what changes, if any, may be necessary to give service providers greater access to federal property.

For the sake of network survivability and security, as well as competition – in addition to setting a proper example for others -- the federal government should insist that federal tenants -- whether in federal buildings or not -- procure telecommunications services, including broadband, from two or more network providers with diverse entrance and exit facilities into the buildings (e.g., different conduit, switches, etc.), so that there is no single point of failure and so that diversity and redundancy are accomplished.

In addition, the federal government ought to lease only in buildings that allow them or any other tenant in the building to gain access on a reasonable and non-discriminatory basis for any licensed service provider that the federal tenant or other tenant may choose, so that they can procure these diverse and redundant services from providers that they choose.

NTIA should recommend that the Bush Administration take very positive steps towards non-discriminatory access in the buildings where it is the landlord and where it is a tenant.  To that end, NTIA should recommend that the Administration adopt a model lease based on non-discriminatory principles.

E.         The FCC has ample authority to address this problem; however, new legislation would clear up any of the FCC’s uncertainties concerning jurisdiction

 

In item N, NTIA asks whether any of the proposed regulatory changes suggested in response to the Notice can be made under existing authority or whether legislation is required.

The Commission has broad authority under Title I of the Communications Act to adopt rules governing entities which do not qualify as common carriers when such rules are “reasonably ancillary” to the performance of its statutory responsibilities.[121] In this case, the Commission has Title I authority to impose non-discrimination rules on MTE owners because such rules are “reasonably ancillary” to the Commission’s Title II duties to ensure that rates and practices among common carriers are just, reasonable, and non-discriminatory.[122] Moreover, such rules are “reasonably ancillary” to the Commission’s responsibility to facilitate greater competition among telecommunications providers in MTEs, as required under sections 251(c) and (d).[123] Section 224 of the Act provides another coherent means of ensuring CLECs reasonable and non-discriminatory access to MTEs.[124] The extensive record established by competitors in the Competitive Network proceeding strongly supports the conclusion that the Commission has ample jurisdiction.[125] However, given the difficulties in the current competitive marketplace, new federal legislation would help eliminate any of the FCC’s remaining uncertainties concerning jurisdiction.

            A handful of states have enacted legislation to ensure that consumers and businesses in MTEs have access to the telecommunications service provider of their choice.

President Bush, as Governor of Texas, signed the most pro-competitive legislation in the country addressing this issue, assuring that consumers and businesses in MTEs in Texas could gain access to the service providers of their choice on reasonable and non-discriminatory terms. Texas prohibits property owners from interfering with or preventing a telecommunications service provider from installing telecommunications service facilities on the owner's property at the request of a tenant.[126] The Texas law contains a nondiscrimination provision that requires the property owner to treat all telecommunications service providers in the same way it treats the ILEC, or renegotiate with the ILEC to treat it in the same way that it treats all telecommunications service providers. Moreover, Texas allows for reasonable compensation for the MTE owners, but it prohibits building owners from demanding compensation on the basis of the type of facilities used, the number of tenants served, or the revenues generated by the telecommunications service provider. Finally, Texas considers any access restrictions that impose delays to be discriminatory and subject to enforcement by the Texas Public Utilities Commission.  WorldCom’s experience is that the Texas environment works to ensure that competitive service providers have reasonable terms for building access.

Connecticut has a similar statute requiring building owners to allow a telecommunications provider to wire the building and provide service at a tenant’s request. Under the Connecticut statute, building owners must allow a telecommunications provider to wire the building and provide service so long as: (1) a tenant requests services from the provider; (2) the costs are assumed by the telecommunications provider; (3) the provider indemnifies the building owner for any damages caused by the wiring; and, (4) the provider complies with State inside wire regulations.[127]

Nebraska and some other state commissions have acted as regulators to promote building access. The Nebraska Public Service Commission recognized that tenants in some other states were guaranteed the ability to choose their telecommunications carrier through building access obligations and expressed its belief that "residents of Nebraska MDUs should have the same choice."[128] Consequently, the Nebraska Commission ordered statewide telecommunications carrier access to residential multi-dwelling units (MDUs).

The Ohio Public Utility Commission mandated MTE access unilaterally -- without legislation specific to the matter.[129] The Ohio Commission held in an order that "no person owning, leasing, controlling, or managing a multi-tenant building shall forbid or unreasonably restrict any occupant, tenant, lessee, or such building from receiving telecommunications services from any provider of its choice, which is duly certified by this Commission.”[130]

The National Association of Regulatory Utility Commissioners (NARUC) has twice addressed the issue of nondiscriminatory access to buildings for telecommunications service providers.  At the Summer 1998 meeting, NARUC passed a resolution urging regulatory and legislative action to ensure that consumers can secure building access for the service providers of their choice on reasonable and non-discriminatory terms. In this resolution, NARUC came out in support of legislative and regulatory policies -- in particular, those similar to statutes and rules in Texas, Connecticut and Ohio -- that allow customers to have a choice of access to telecom providers in multi-tenant buildings; and that will allow all telecom providers to access, at fair, nondiscriminatory and reasonable terms and conditions, public and private property in order to serve a customer that has requested service of the provider.[131] Additionally, at the NARUC meeting in July of this year, NARUC hosted a panel, which addressed the difficulty in determining what is a fair and reasonable price to pay for public rights-of-way.

Although some of the states have recognized the building access problem and have enacted legislation to ensure that consumers and businesses in MTEs have access to the telecommunications provider of their choice, a national solution is preferable for many reasons. While some state commissions and state legislatures have adopted non-discriminatory building access requirements, the majority has not.  Thus, in most states, competitors are left without building access remedies. Even in the states where landlords are required to grant competitors nondiscriminatory access to MTEs, these requirements can be rendered ineffective by the operations of nationwide property management companies. Multi-state landlords can pressure service providers not to exercise their rights in one state because these service providers will be denied access by that landlord to buildings in other states. NTIA should urge the Bush Administration to take the lead in keeping telecom competition on track by establishing a set of national rules for the states to follow that prohibit unreasonable and discriminatory MTE access requirements.

 

                                                                                    Respectfully submitted,

 

                                                                                    WorldCom, Inc.

 

 



[1]  “High-Speed Services for Internet Access: Subscribership as of December 31, 2000,” Industry Analysis Division, Common Carrier Bureau, Federal Communications Commission, August 2001 (706 Subscribership Report) at 4.

[2]  706 Subscribership Report at 2.

[3] 706 Subscribership Report.

[4] Id.

[5] Id.

[6] 47 USC 157 nt.

[7] Inquiry Concerning the Deployment of Advanced Telecom Capability to All Americans in a Reasonable and Timely Fashion, CC Docket No. 98-146, 14 FCC Rcd 2398 (1999), at para. 20 (“First FCC Report to Congress”).

[8] Id.

[9] Id. at para. 25.

[10] Id. at paras. 18-64. 

[11] Id. at para. 28.

[12] Id.

[13] Id. at para. 25.

[14] Second FCC Report to Congress at para. 12.

[15] Remarks of FCC Chairman Michael K. Powell at the National Summit on Broadband Deployment, Washington, D.C., Oct. 25, 2001 (October 2001Chairman Powell Speech).

[16]  “Broadband Available to 75 Percent of U.S. by Year’s End,” George A. Chidi, Jr., InfoWorld, Nov. 1, 2001.

[17]  Id.

[18]  706 Subscribership Report at 2.

[19]  Id.

[20]  706 Subscribership Report at Table 3.

[21] In the Matter of Inquiry Concerning the Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely Fashion, and Possible Steps to Accelerate Such Deployment Pursuant to Section 706 of the Telecommunications Act of 1996, First Report and Order, 14 FCC Rcd at 2446-47.

[22] “Broadband Deployment and the Digital Divide,” Wayne A. Leighton, Aug. 7, 2001 (Leighton Analysis) at 12-13.

[23] The complete set of statistics is available on TeleChoice’s Web site, www.xdsl.com.

[24]  See, e.g., 706 Subscribership Report at Table 4; see also “North American DSL Market Reaches 4.7 Million, According to TeleChoice; U.S. Market Grows by 15% Quarter over Quarter,” PR News Wire via Dow Jones, Nov. 27, 2001, citing statistics published by TeleChoice, Inc.

[25] “North American DSL Market Reaches 4.7 Million, According to TeleChoice; U.S. Market Grows by 15% Quarter over Quarter,” PR News Wire via Dow Jones, Nov. 27, 2001, citing statistics published by TeleChoice, Inc.

[26] BellSouth Corp. Investor Briefing, Dresdner Kleinwort Wassertein Research, Aug. 28, 2001, at p. 2.

[27] “BellSouth Earnings Steady on Good Data Sales; Trims Profit Outlook, Plans 3,000 Job Cuts,” John Curran, Telecommunications Reports, Oct. 18, 2001.

[28] McDonald Investments, Investor Report, Sept. 18, 2001 at p. 5. 

[29] “Verizon Hits 1 M DSL Landmark,” Peter J. Howe, Boston Globe, Oct. 18, 2001.

[30] “News in Brief,” Telecommunications Daily, Oct. 17, 2001.

[31] SBC Investor Briefing, Oct. 22, 2001, www.sbc.com/investor/financial/earning.

[32] Covad Communications Group, Inc. Form 10-Q for the quarterly period ended September 30, 2001, at p. 21.

[33] “WorldCom Closes Rhythms Transaction,” WorldCom Corporate Press Release, dated December 5, 2001.

[34] See Comments of NTCA, Section 706 Notice, CC Docket No. 98-146, dated September 24, 2001, at p. 12. 

[35] “Low Demand Leads Rural TELCOs to Slow Broadband Deployment,” TR Daily, December 10, 2001.

[36] NECA Rural Broadband Cost Study: Summary of Results, June 21, 2000 (NECA Rural Broadband Cost Study) at 2. 

[37] NECA Rural Broadband Cost Study at 2 (footnote omitted).

[38] 706 Subscribership Report.

[39] Remarks of Robert Sachs, NCTA President and CEO, at Cable 2001: We’re Making Broadband Happen, Chicago, Illinois, June 11, 2001.

[40] See http://www.ncta.com/industry_initiatives/bridging

[41] Robert Sachs, President & CEO, National Cable & Telecommunications Association, "The Changing World of Cable TV," San Diego State University, November 30, 2001.

[42] www.commweb.com/article (noting that, as of February 2001, Sioux Valley Wireless served more than 350 homes and businesses with MMDS).

[43] See Comments of Hughes Network Systems, Section 706 Notice, CC Docket No. 98-146, dated September 24, 2001, at pp. 3, 5.

[44] “Satellite v. Cable: A Rivalry Beyond TV,” New York Times, February 19, 2001.

[45] “Slow Mo,” Wall Street Journal, at p. B5, Oct. 18, 2001.

[46] Jon Garcia, McKinsey & Co., National Summit on Broadband Deployment: 2001 A Digital Odyssey. Oct. 25, 2001 (McKinsey Presentation), transcript available at www.adminmonitor.com.

[47]  See “The Broadband Household,” Kevin Fitchard, Telephony Magazine, Nov. 12, 2001, citing Jupiter Research.

[48] “Poll Suggests Demand, Not Supply, Is Main Obstacle to Broadband Deployment,” Telecommunications Daily, Dec. 3, 2001.

[49]  “Broadband Available to 75 Percent of U.S. by Year’s End,” George A. Chidi, Jr., InfoWorld, Nov. 1, 2001, citing the Yankee Group.

[50] “Broadband Home Use Jumps,” Alorie Gilbert, CNET, December 11, 2001.

[51] “Universal Provision of DSL Services in Florida,” Interim Project Report 2002-146, October 2001 (Florida Report).

[52] Id.

[53] U.S. General Accounting Office, “Characteristics and Choices of Internet Users” Report to the Ranking Minority Member, Subcommittee on Telecommunications, Committee on Energy and Commerce, House of Representatives,” February 2001, Appendix II, Question 15.  

[54] Florida Report at 3.

[55] Florida Report at 3.

[56]  “Dump Broadband Movement Growing,” John Borland, ZDNet, Nov. 7, 2001.

[57] October 2001 Chairman Powell Speech.

[58] Id.

[59]  “Dump Broadband Movement Growing,” John Borland, ZDNet, Nov. 7, 2001.

[60] “Broadband Deployment and the Digital Divide,” Wayne A. Leighton, Aug. 7, 2001 (Leighton Analysis) at 12-13.

[61]  WorldCom Comments, In the Matter of Federal-State Board on Universal Service, CC Docket No. 96-45, filed Nov. 5, 2001.

[62] NECA Rural Broadband Cost Study: Summary of Results, June 21, 2000 (NECA Rural Broadband Cost Study) at 2.  This estimate was derived from two studies: (1) a detailed engineering study that was completed by a sample of companies that had or were in the process of upgrading their exchanges to broadband capability; and (2) a deployment study to estimate the percentage of lines that would not be upgraded to broadband capability by 2002. Id. at 3. WorldCom takes no position as to whether NECA’s estimate is accurate.  We offer it solely for the purposes of illustration.

[63] “Facilitating the Business Case for Rural Upgrades: Presentation to Broadband Summit,” Michael Balhoff, Legg Mason, Oct. 26, 2001. To view the presentation, see www.adminmonitor.com.

[64] See NECA Comments, Section 706 Comments, CC Docket No. 98-146, dated September 24, 2001, at p. 33.

[65] See Comments of the Public Utility Commission of Texas, Section 706 Comments, CC Docket No. 98-146, dated September 24, 2001, at p. 3.

[66] “Advanced Telecommunications in Rural America,” NTIA, RUS, April 2000, at 40.

[67] October 2001 Chairman Powell Speech.

[68] “Broadband Internet Access and the Digital Divide: Federal Assistance Programs,” Lennard G. Kruger, CRS Report for Congress, Congressional Research Service, Updated January 26, 2001, Table 2.

[69] Id.

[70] Leighton Analysis at 6.

[71] http://www.ntia.gov/otiahome/top/whatsnew/whatsnew.html, Oct. 1, 2001.

[72] Advanced Telecommunications in Rural America,” NTIA, RUS, April 2000, at 35.

[73] Press Release, USDA Awards $15 Million in Rural Education and Medicine Grants, June 14, 2001.

[74] www.ncta.com/industry_initiatives.

[75] www.ncta.com/industry_initiatives.

[76] www.ncta.com/industry_initiatives.

[77] www.ncta.com/industry_initiatives.

[78] www.ncta.com/industry_initiatives.

[79] WorldCom further recommends that policymakers review CECA’s universal service report, which includes a helpful flow chart of questions to assist policymakers in determining whether subsidies are required to increase broadband service deployment.  See “Universal Service: Policy Issues for the 21st Century,” Final Report, the Consumer Energy Council of America, rel. March 2001 (CECA Report), at Appendix 5.

[80] Jean F. Walker, “Paved with Good Intentions: How InterLATA Data Relief Undermines the Competitive Provisions of the 1996 Act,” Federal Communications Law Journal, Vol. 53, No. 3, May 2001, at p. 553 (footnotes omitted) (citing statements from Covad and AT&T).

[81] “Broadband Market Growth Slows,” The Washington Post, August 28, 2001, at pp. E1, E10.

 

[82] See Email letter from Tom Davis, Member of Congress, to constituent, dated September 5, 2001.

[83] Comments of Verizon on the Third Notice of Inquiry, CC Docket No. 98-146, dated September 24, 2001, at fn 52.

[84] Reply Brief of Petitioners Federal Communications Commission and the United States at 14, Verizon vs. FCC, S.Ct. Nos. 00-511, 00-555, 00-587, 00-590 and 00-602 (July 2001).

[85] “SBC’s $6 Billion Project Pronto Initiate Brings DSL Internet to 80% of its Customers, available at www.sbc.com/data/network/0,2951,5,00.html

[86]          Petition of Rhythms Links, Inc. Against Southwestern Bell Telephone Company for Post-Interconnection Dispute Resolution and Arbitration Under the Telecommunications Act of 1996 Regarding Rates, Terms, Conditions and Related Arrangements for Line Sharing, Texas PUC Docket 22469, Revised Arbitration Award issued September 20, 2001  at pp. 74-75.

[87] See generally Robert Cannon, “Where Internet Service Providers and Telephone Companies Compete: A Guide to the Computer Inquiries, Enhanced Service Providers and Information Service Providers,” CommLaw Conspectus, Volume 9, Number 1 (2001), at 49.  

[88] Daniel Levine, “’Contract’ killer: SBC aims at Internet,” San Francisco Business Times, June 15, 2001; John Borland, “ISPs fight for more than DSL scraps,” News.com, June 26, 2001.

[89] California ISP Association, Inc. v. Pacific Bell Telephone Co., Case No. 01-07-027, before the California Public Utilities Commission, filed July 25, 2001.

[90] See Memorandum Opinion and Order, Joint Application by SBC Communications Inc., Southwestern Bell Telephone Company, and Southwestern Bell Communications Services, Inc. d/b/a Southwestern Bell Long Distance Pursuant to Section 271 of the Telecommunications Act of 1996 To Provide In-Region, InterLATA Services in Arkansas and Missouri, CC Docket No. 01-194, rel. November 16, 2001, at ¶ 83.

[91] Sue Ashdown, executive director of the American ISP Association, has stated that “we have brought actual documented evidence of violations to the FCC and the FCC has done nothing….  Not a penny [has been] assessed by the FCC for discriminatory behavior [by the RBOCs] against the ISPs.”  Mark Holmes, “Broadband Growth Unable to Allay ISP Fears,” Broadband Networking News, October 12, 2001.

[92] Eric Krapf, “The Coming DSL Debacle,” Business Communications Review (June 2001), at 6.

[93] Notice of Proposed Rulemaking, Performance Measurements and Standards for Interstate Special Access Services, CC Docket No. 01-321, rel. November 19, 2001.

[94] Opinion and Order Modifying Special Services Guidelines for Verizon New York Inc., Conforming Tariff, and Requiring Additional Performance Reporting, Case 00-C-2051, issued and effective June 15, 2001.

[95] Section 253(a).

[96] Section 253(c). 

[97] Promotion of Competitive Networks in Local Telecommunications Markets, Notice Of Proposed Rulemaking And Notice Of Inquiry, WT Docket No. 99-217, released July 7, 1999.

[98] See e.g., In the Matter of Promotion of Competitive Networks in Local Telecommunications Markets, “Rights-of-Way Notice of Inquiry,” WT Docket No. 99-217, Comments of WorldCom, AT&T, Sprint, ICG, GTE, filed October 12, 1999.

 

[99] City of Auburn, 247 F. 3d  984.

 

[100] GTE Rights-of-Way Notice of Inquiry Comments, Appendix A.

 

[101] See e.g., Bell Atlantic-Maryland Inc. v. Prince George’s County, 49 F. Supp. 2d 805, 814 (D. MD.), City of Auburn v. Qwest Corp. 247 F. 3d 966, 981 (9th Cir. 2001).

 

[102] See e.g., City of Auburn, 247 F. 3d at 983-85; City of White Plains, 125 F. Supp. 2d at 93.

[103] Prince George’s County, 49 F. Supp. 2d at 817.

[104] Accord City of Auburn, 247 F. 3d at 981.

[105] City of Howarden, 590 N.W. 2d at 510.

[106] City of Berkeley, ___ F. Supp. 2d ___, 2001 WL 641534 at *14; Accord City of Auburn, 247 F. 3d at 981, 984; New Jersey Payphone Ass’n v. City of West New York, 130 F. Supp. 2d 631, 638 (D.N.J. 2001), Grant County, slip op. at 12-13; City of Dallas I, 8 F. Supp. 2d at 593; and City of Howarden v. U.S. West Communications, Inc., 590 N.W. 2d 504, 510 (Iowa 1999).

[107] Prince George’s County, 49 F. Supp. 2d at 818; PECO Energy Co. v. Township of Haverford, No 99-4766, 1999 WL 1240941 (E.D. PA. December 20, 1999).

[108] See e.g., TCG Detroit v. City of Dearborn, 16 F. Supp. 2d 785 (E.D. Mich. 1998), aff’d 206 F. 3d 618 (6th Cir. 2000) and City of White Plains, 125 F. Supp. 2d at 95-98.

 

[109] NTIA Notice, Section II.L.

 

[110] Fair Market Value Analysis for a Fiber Optic Cable Permit in National Marine Sanctuaries, National Oceanic and Atmospheric Administration (NOAA), Date?

 

[111] Id., at 15.

 

[112] Promotion of Competitive Networks in Local Telecommunications Markets, WT Docket No. 99-217, First Report and Order and Further Notice of Proposed Rulemaking in WT Docket No. 99-217, Fifth Report and Order and Memorandum Opinion and Order in CC Docket No. 96-98, and Fourth Report and Order and Memorandum Opinion and Order in CC Docket No. 88-57, FCC 00-366 (released October 25, 2000)(“Competitive Networks Order”).

[113] WorldCom has decommissioned 14 POPs in Texas and 2 POPs in Colorado, partially due to landlords’ high rent demands.

 

[114] In another case, WorldCom decommissioned its POP in a building in Los Angeles that WorldCom had been serving for over five years after negotiations with the landlord over a reasonable rental rate failed. The landlord’s demands for a percentage of revenue made serving the building unprofitable. In another example, WorldCom was forced to close a POP in a building in Boston when the landlord demanded an increase in rent from $1,000 annually to $3,000 per month. The landlord refused WorldCom’s final offer of $400 per month.

[115] In twenty-one buildings in Texas, New Mexico, Colorado, Oklahoma, Arizona, and Utah, WorldCom has been forced to collocate, rather than put in POPs, due in most cases to high access fees.

[116] In another case, the landlord of a building in Baltimore, Maryland refused to discuss a renewal of WorldCom’s existing $200 month rental agreement unless WorldCom would agree to $600 month. WorldCom was not able to renew.

[117] In a Northern Virginia building, the landlord hired a telecom consultant who recommended that WorldCom pay a monthly fee of $850 and a one-time license administration fee of $1,700 for space for one rack of equipment in the lower level MMR room of the building. The consultant refused to negotiate this rate, even though the market rate for floor space between 150-200 square feet in the McLean, Virginia area ran about $340 a month at the time. The deal he was proposing at $850 a month equated to $1,133 per square foot (using nine square feet for a rack footprint) which is about 45 times the average office lease rental rate. The ILEC is not paying anything currently.

 

[118] In another case, WorldCom was stopped by the landlord of a building in Atlanta, Georgia, from building three feet of conduit and expanding two pull boxes in the building. WorldCom has a License Agreement at this building and installed a POP. During renewal negotiations for a 1,100 square foot space, the landlord requested $3,000 per month for use of a conduit that was installed years ago. It is not customary to collect rent on a conduit that was built years ago. In another Atlanta building, the landlord stopped WorldCom’s engineers from adding a conduit and removing an existing one, saying that WorldCom would have to enter into a License Agreement and pay a fee of $75,000.  WorldCom has three Access License Agreements for this building that are in good standing which cover upgrades, construction, installations and maintenance. After six months of negotiation, WorldCom finally convinced the landlord to allow construction of the needed conduit. In another example, the landlord of a building in New York City wants to charge WorldCom an additional fee to run fiber, even though WorldCom has a License Agreement in place that covers fees.

[119] In a New York City building, WorldCom is being stopped by the landlord from building new fiber riser for large customer/tenant. The landlord will probably allow only a home run to this customer.

[120] In five buildings in New York City, landlords are insisting that WorldCom put all fiber in conduit.

[121] U.S. v. Southwestern Cable, 392 U.S. 157, 178 (1968); see also 47 U.S.C. § 154(i).

[122] 47 U.S.C. § 201(b)

[123] 47 U.S.C. §§ 251 (c) and (d).

[124] 47 U.S.C. § 224 (f)(1).

[125] See e.g., Promotion of Competitive Networks in Local Telecommunications Markets, WT Docket No. 99-217, Comments of the Smart Buildings Policy Project (filed January 22, 2001) and Reply Comments of the Smart Buildings Policy Project (filed February 21, 2001) for a discussion of the Commission’s authority under the Communications Act of 1934 and the Telecommunications Act of 1996 to ensure non-discriminatory access to MTEs. See also Letter from Gunnar D. Halley, Counsel for Smart Buildings Policy Project to Ms. Magalie R. Salas, WT Docket No. 99-217, September 5, 2000 for a discussion of the constitutional and jurisdictional issues related to the Commission’s authority to promulgate non-discriminatory access rules.

[126] Texas Public Utility Regulatory Act,  §§ 54.259 and 54.260, implemented by Texas Public Utility Commission Project No. 18000.

[127] Connecticut General Statutes, Section 16-2471.

[128] In the Matter of the Commission, On Its Own Motion, To Determine Appropriate Policy Regarding Access To Residents of Multiple Dwelling Units (MDUs) in Nebraska By Competitive Local Exchange Telecommunications Providers, Application No. C-1878/PI-23, Order Establishing Statewide Policy for MDU Access, slip op. at 4 (Neb. P.S.C., March 2, 1999).

[129] Commission's Investigation into the Detariffing of the Installation and Maintenance of Simple and Complex Inside Wire, Case No. 86-927-TP-COI, Supplemental Finding and Order, 1994 Ohio PUC LEXIS 778 at *20-21 (Ohio P.U.C. September 29, 1994).

[130] Id.

[131] Resolution Regarding Nondiscriminatory Access to Buildings for Telecommunications Carriers, NARUC, Approved Telecommunications Resolutions, Summer 1998 Meeting.