National Telecommunications and Information Administration

U.S. Department of Commerce

Washington, D.C.

Deployment of Broadband Networks ) Docket No. 011109273-1273-01

and Advanced Telecommunications)

)

COMMENTS OF BELLSOUTH CORPORATION

BellSouth Corporation, for itself and its wholly owned affiliated companies (collectively “BellSouth”), submits the following comments in response to the National Telecommunications and Information Administration’s (“NTIA”) Request for Comments on Deployment of Broadband Networks and Advanced Telecommunications (“Notice”).Additionally, BellSouth has attached to these comments, as Exhibit 1, a paper prepared by Dr. Robert G. Harris, Professor Emeritus and Former Chair of the Business and Public Policy Group at the Haas School of Business, University of California at Berkeley, and a Director at LECG, LLC, that specifically address several of the questions asked by the NTIA in its Notice (“Harris Paper”).

I. Introduction and Summary

The NTIA issued the Notice as part of an “ongoing effort to obtain more information about broadband issues . . .to assist the Administration in developing a domestic telecommunications policy and to continue.NTIA’s support for removing obstacles to broadband deployment.”[1]BellSouth applauds the NTIA in this effort.A comprehensive national broadband policy must be developed and implemented if the current administration wants to see the benefits of broadband in the economy and in the lives of all Americans.[2]No one doubts the potential benefits that broadband can offer.Indeed, as the NTIA has recognized, the role of the Internet in our daily lives and in business is and will continue to be significant.Also, without question, that role will be influenced by how broadband deployment takes place.Bill Gates, Chairman of Microsoft, recently remarked that “broadband deployment access [is] the weakest link of the Internet.Gates said development of a number of Internet companies and improved technology is being held back because the vast majority of consumers still use a dial-up service.”[3]It is clear that the faster this deployment can be completed, greater capabilities and use of the Internet will be realized.

Yet, deployment continues to struggle.Why?Because regulatory policies concerning broadband have not been adopted to ensure widespread deployment; instead, existing policies have been based on segmenting the market along arbitrary regulatory lines.Accordingly, a national broadband policy should be developed to ensure that deployment does not continue to be stifled by antiquated and one-sided regulatory policies.Economic growth demands that regulation be scaled back and that the free, unfettered operation of the market be embraced.To foster growth and broadband deployment, a level playing field must be established for all broadband competitors regardless of the mode used to provide the broadband services.Immediate corrective action is needed to eliminate the competitive disparities that exist because of regulation placed on incumbent local exchange carriers (“ILECs”) as opposed to other broadband providers.This not only includes rolling back current ILEC regulation but also abandoning current discussions of further regulatory requirements on broadband.

The regulatory policies implemented thus far ignore the fact that competition among broadband providers crosses different provisioning modes.[4]Broadband services, however, constitute a new, highly competitive market.For example, ILECs have deployed services that extend high-bandwidth capability to the home and business.This deployment includes both fiber facilities and digital services over copper loops in the form of digital subscriber line (“DSL”) services.Satellite operators currently offer nationwide high-speed Internet access.Cable companies continue to upgrade their ubiquitous cable networks and are offering consumers high-speed cable modems.Competitive local exchange carriers (“CLECs”) continue to provide high-speed data services using their extensive fiber networks or by purchasing unbundled network elements from ILECs, and installing their own DSL equipment.Terrestrial wireless technologies also are being deployed to provide broadband capability in a number of spectrum bands such as 24 and 38 GHz.Other terrestrial wireless providers, including local multipoint distribution service (“LMDS”) providers, multipoint distribution service (“MDS”) providers and even digital television broadcasters, are fast becoming full-fledged providers of broadband.For competitive assessment purposes, these many solutions for advanced telecommunications capability over the “final mile” form a broadband market that is highly competitive.But, not all competitors stand on an equal footing.Asymmetrical in regulation shackle telephone companies and protect other broadband providers from the full scope of competitive market forces.Competitive inequities present in the current regulatory paradigm will not allow full competitive growth to continue as it should.Although numerous providers have jumpstarted deployment of broadband, regulatory inequities among competitors have and will continue to impede competitive growth in the future.

Currently, policies affecting broadband are a mish-mash of incongruent rules and requirements depending on the media over which the broadband is delivered. These imbalanced policies equate to policy makers favoring other forms of broadband technology over those provided by ILECs.[5]Moreover, in an untenable attempt to further prop up non-ILEC competitors, the Federal Communications Commission (“FCC” or “Commission”) presently has several policy matters before it that, if adopted, would create more barriers to investment in broadband by the ILECs.[6]

Because broadband crosses conventional industry and regulatory lines, market participants currently face disparate levels of regulation, but for no rational reason.As the Commission has already acknowledged,[7] no entrant dominates the broadband market, thus no class of competitors should be subject to arduous regulation designed to protect against an abuse of market power.An ILEC’s ownership of local exchange facilities awards it no significant competitive advantage in providing broadband, particularly as its local exchange facilities are subject to mandatory unbundling and resale obligations.In fact, the cable industry, not the ILECs, enjoys the greatest share of the broadband access market,[8] and long-distance carriers have a clear advantage in the broadband networking services market.Indeed, the Commission recently acknowledged that cable modems grew to 3.3 million lines by December 31, 2000 as compared to 1.6 million ADSL lines.[9]Cable modem dominance will likely continue as it has in past years.Subjecting ILECs – or any broadband suppliers, for that matter – to cumbersome regulatory requirements for broadband is unnecessary and only thwarts their full participation in the market, inhibits their incentive to develop innovative service offerings, encumbers their ability to respond to shifting market conditions, and ultimately delays widescale deployment and increases the cost of broadband for consumers.

A comparison of the regulations placed on ILECs as compared to cable modem providers, the leading provider of broadband services, best illustrates the unfair regulatory burdens shouldered by the ILECs.The economic similarities of ILECs and cable companies are significant.The services that ILECs and cable modem providers are marketing are both directed toward the mass market.Each has an existing customer base and an existing network.Both are new entrants into the broadband market and therefore neither is dominant, even though cable modem providers have a clear lead on the number of customers.Both have made large investments in their networks and have considerable resources to devote to deployment.

With these striking similarities one would assume that these entities would be allowed to compete on a level regulatory playing field.Nothing could be further from the truth, however.The regulatory disparities are stark and overwhelming.ILECs are prohibited from providing broadband across a LATA boundary; cable modem providers are not.The LATA boundary is an anachronistic concept that has no meaning in advanced telecommunications.It was developed in a world dominated by voice traffic over a public, circuit-switched network.Broadband was not even a twinkle in an engineer’s eye.At the dawn of the 21^st century, it is irrational for broadband policy to be constrained by an outdated 20^th century fiction.

Moreover, many ILEC services are subject to price regulation.ILECs must file tariffs with the Commission to establish the rates, terms and conditions under which they deal with their customers; cable modem providers do not.ILECs must, under certain circumstances, unbundle their network for competitors to use to provide broadband;[10] cable modem providers bear no such obligation.ILECs must allow competitors to collocate on their premises; again, cable modem providers bear no such obligation.ILECs must allow access to the loop facilities on a shared basis with their competitors; cable modem providers do not.Many of these same regulatory inconsistencies exist between ILECs and other broadband providers as well.Indeed, it is clear that regulation is favoring certain technology and providers over others and in the process leading to a potentially large inefficiency in the market’s allocation of resources.

All of these hodgepodge policies and regulations regarding broadband lead to one inevitable conclusion – uncertainty in the market.And, uncertainty is strangling the market of much needed investment dollars and application providers.

Uncertainty and an ever-increasing probability of greater regulation has stagnated investment dollars from pouring into the market.Moreover, this lack of investment dollars has an already risky application provider market completely on edge.These two ingredients have further aggravated the “chicken and egg” problem that exists in the broadband market today.Some speculate that the widespread deployment of broadband will not occur unless and until application providers develop “killer apps” that will run effectively only over broadband.Only then will consumers be motivated to obtain broadband, which in turn will motivate full deployment.Others speculate that application providers will have no incentive to spend the investment dollars necessary to chase after the next great application until a ready broadband mass market is available to receive it.Regardless of which theory is correct, there can be no doubt that the uncertainty that exists in the market has only exacerbated the problem, and it will not get better until this uncertainty is removed.[11]

It is not an oversimplification of the problem to state that the answer to removing regulatory uncertainty in the market begins with policy makers realizing and embracing the unmistakable facts that broadband is a competitive market with multiple providers and none of these providers should face differing regulatory treatment.[12]Accepting and embracing these facts will produce policies that strengthen broadband deployment by allowing the market, not regulators, to determine winners and losers.Unless these facts are acknowledged,retreading broadband through the same old regulatory models may change the wrapping but not the contents of the package.Moreover, embracing these facts will shift thinking about broadband and produce a new regulatory paradigm – one with a deregulatory focus – that will allow for the explosion of broadband growth.

The NTIA is asking the right questions to meet this end.For example, determining the definition of broadband is pivotal to all other discussion surrounding broadband’s future.While this may seem obvious, various Commission policies, discussed briefly above and more thoroughly below, demonstrate unwillingness to accept and apply a universal definition of broadband to all providers.While many may debate the proper definition of broadband, one thing should be certain, once the definition is established it must be the same for all entities.[13]It is beyond explanation that two entities can provide the exact same high-speed Internet access to a retail customer with the only difference being the type of facilities used to deliver the service, yet each are treated exponentially different by regulators.When entities provide services defined as broadband, whatever that definition ultimately ends up being, then they must be treated the same.Anything else establishes favoritism toward one provider, which perpetuates market uncertainty.

The Commission, through its current forbearance and other statutory authority, can cut much of the Gordian knot that has been created in the broadband market by poor regulatory policies.The NTIA should therefore encourage the Commission to take these steps.Decreased regulation could be completed immediately and would be a very positive first step.In addition to this, however, the NTIA should also recognize that state regulation can pose an impediment to broadband regulation.Accordingly, the NTIA should work toward an overall goal of eliminating any form of unnecessary regulation.This goal may ultimately require a legislative approach.

II.The NTIA Must Understand the Negative Impact the Commission’s Regulatory Policies have had on the Broadband Market

As briefly summarized above, a wide range of competitors is deploying a variety of broadband technologies.This deployment is occurring in backbone as well as last mile facilities.Moreover, while deployment is obviously taking place faster in more densely populated areas, the market is carrying broadband capabilities to rural areas as well.Of course, competition among the various providers and full benefit to consumers would be occurring even faster and competition would be even greater among service providers if some competitors were not hobbled by more stringent regulatory burdens and obligations.Furthermore, the disincentives created by existing regulation and future regulatory uncertainty inhibits the deployment of new and innovative services that could be made available to consumers.With these issues in mind, BellSouth limits its comments to what can be done under the current legislative and regulatory environment to remove obstacles from broadband deployment while the Harris Paper, in response to the NTIA questions, fully explains how current regulatory policies have impeded broadband deployment in the past and demonstrates the absolute detrimental effect that such polices, if left unchecked, will have on future broadband expansion.

A.Current Regulation

Future deployment of broadband will best occur through equal competition among broadband providers.Competition, however, requires that the Commission act neutrally and treat all competitors alike.As discussed previously, asymmetric regulation will impede ILEC deployment of ADSL, and other broadband capabilities, while other providers are unencumbered by regulatory constraints in their deployment of broadband facilities and services.For example, BellSouth is a leading provider of DSL technology.With a long history of serving residential, rural and small business customers, BellSouth and other ILECs are well-positioned to provide such broadband services to all of these customer segments.But providing widescale broadband capability is a considerable feat, even for an ILEC.It requires developing technologies, retrofitting loops or laying new networks, investing in costly new equipment and training service personnel.With these tasks accomplished, an ILEC is still handicapped in deploying broadband by pricing, tariffing and other regulatory requirements, in addition to interLATA restrictions that bar the BOCs from providing advanced end-to-end networking services such as frame relay and ATM across LATA boundaries.

If those regulatory constraints weren’t enough, the Commission currently has initiated dockets that contemplate further broadband unbundling requirements, including packet switching.Although the Commission initially determined that such unbundling was unnecessary,[14] the Commission currently is reviewing this decision in other proceedings.[15]The existing regulatory requirements have limited broadband growth; further unbundling would cripple ILEC broadband deployment.

B. Disincentives Caused by Current Policies

Deployment of network equipment necessary to provide broadband is extremely costly.As with any investment, risk and reward determine the willingness of a carrier to commit capital resources to innovative network equipment.Requiring ILECs to open their investment, through unbundling, to other carriers that incur no risk yet have the ability to achieve the rewards, has a stifling effect on any investment.[16]If ILECs are forced to unbundle their network investment in a nascent market to other carriers, they may simply choose not to invest.The limited rewards will not justify the investment.[17]

The NTIA must therefore realize the effects unbundling has on investment and innovation in broadband.There are important differences between the effects of unbundling elements used to provide traditional voice telecommunications services and the effects of unbundling new investment used to provide broadband.The risk associated with high technology deployment is greater than that required to deliver traditional services.This technology is rapidly evolving and equipment can quickly become obsolete.Additionally, ILECs face stiff competition from other broadband providers.

In fact, the Commission has even acknowledged that “investments in facilities used to provide service to nascent markets are inherently more risky than investments in well established markets.Customer demand for advanced services is also more difficult to predict accurately than is the demand for well established services . . . .”[18]An important part of the Commission’s reasoning to not unbundle broadband equipment in the past, even though traditional services equipment had been unbundled, was to avoid stifling competition and to encourage innovation.[19]This fact remains all the more relevant today.

Clearly, current regulatory policies coupled with the threat of even more unfavorable regulation is having a chilling effect on ILECs’ incentives to invest in broadband technologies.Moreover, such policies also negatively affect CLEC investment in their own facilities.CLECs will not have any incentive to invest in equipment to provide broadband if they can ride the backs of, and shift investment risks to, the ILECs.If the investment disincentives of the existing, as well as possible additional, broadband polices continue, new investment in broadband facilities will be eschewed.

Indeed, BellSouth is currently contemplating an investment decision that it will abandon if the Commission imposes further regulations on broadband deployment.BellSouth has steadily deployed DSL capability in many areas within its region.Much of that deployment, however, occurred in areas that included adequate space to locate new equipment and required the least amount of re-engineering of the network.For example, placing a digital subscriber line access multiplexer (“DSLAM”), a piece of equipment necessary to provide DSL, in a central office is more deployment-friendly because space concerns are not usually a problem.Conversely, deployment of a DSLAM in a remote terminal is significantly more challenging.[20]Typically, such deployment requires that a new environmentally protected cabinet be installed to house the DSLAM.BellSouth has deployed remote terminal DSLAMs in some cases.In other instances, the cost of such an investment or limited easement space at the remote terminal makes deployment cost prohibitive.Many of these areas, however, have the opportunity to be served by competitors such as cable modem providers or wireless providers.If BellSouth wants to compete for such customers, an integrated network option must be used.

BellSouth is working with a vendor to develop an integrated solution.This solution uses line cards that can be installed in many of BellSouth’s DLC systems, within the remote terminal, that will allow the DSL service to be provided over the DLC from the customer’s premises to the serving wire center.[21]The biggest potential advantage of an integrated DSL solution relative to an overlay solution, i.e., remote DSLAM,is that capital can scale much more directly with service penetration.A remote DSLAM requires dedicated real estate and its own environmental and power infrastructure.A significant capital outlay[22] is necessary before a single line of DSL can be provisioned.An integrated solution can reduce the initial investment to less than $10,000.Although this cost advantage can be significantly diminished by higher line card costs,[23] at low take rates and in small-scale deployments it offers a significant advantage in capital efficiency.

With the implementation of this integrated solution, DSL service could potentially be provided to over 4,300,000 lines that are served by remote terminals.Many of these remote terminal systems are located in rural areas and serve fewer than 100 customers each.Based on BellSouth’s business analysis, an integrated solution would yield little margin, but, assuming no new regulatory burdens are placed on ILECs, BellSouth plans to expend significant resources to operationalize this integrated solution in BellSouth's serving area.The plan is to deploy it in many locations where overlays will not work, particularly in rural locations where it would be BellSouth’s only viable means of competing with other broadband providers.This plan, if implemented, would expand overall broadband coverage to as much as 80% of BellSouth’s subscriber base.Much of the increase would be in the more rural parts of BellSouth’s territory.As stated, the business case predicts slim margins assuming the current regulatory environment.Under this environment BellSouth is not required to unbundle line cards or packet switching, nor is it required to collocate a competitor’s line cards[24] within its DLC system.Required unbundling of line cards or packet switching or collocation of line cards, at TELRIC pricing, would strain these margins beyond viability.In such an instance BellSouth would simply abort further deployment of the integrated solution.

The Commission has stabilized the traditional local services market by providing clarity to the elements that are subject to unbundling, e.g., traditional loops, sub-loops, ports and switching, etc.Policies that eliminate regulation and allow an already competitive market to control would likewise bring stability to the broadband market by determining with equal clarity that investment in new broadband technology will not be unbundled.This will give all carriers the confidence to deploy new technology to make broadband available to more end-users.This confidence will stimulate investment and result in more Americans having access to broadband.

C. NTIA Should Urge the Commission to Roll Back Regulation

The immediate goal of the NTIA should be to help implement the removal of regulatory disparity that currently exists in the broadband marketplace.Accordingly, the NTIA should urge the Commission to take steps to further encourage competition and enhance deployment.As part of Section 706 of the Telecommunications Act of 1996 (“1996 Act”), Congress required the Commission to undertake this comprehensive examination of the “availability of advanced telecommunications capability to all Americans.” [25] The Commission’s mandate is explicit – if the deployment of broadband is not progressing in a reasonable and timely fashion to all potential users, the Commission must take immediate action to accelerate deployment of broadband by removing regulatory restraints that chill broadband investment and inhibit competition.There are immediate steps the Commission could take to accelerate the process.The most powerful incentive for accelerating deployment of advanced telecommunications capability to all Americans is consumer demand.Competition in the broadband marketplace needs no regulatory surrogate.Numerous participants are offering broadband using innovative, competing technologies, and no supplier can unilaterally exercise market power.The solution, therefore, is not to impose Title II regulation on cable operators or other broadband providers, but instead, to eliminate regulation of broadband for all providers.With reasonably competitive conditions, the market achieves economically efficient use of resources more quickly and more reliably than government regulation.To stimulate innovation and investment in broadband infrastructure, as Congress prescribed, the NTIA should strongly push for the Commission to eliminate artificial constraints on some competitors.This act would permit the developing marketplace to select the technologies and service providers that best meet consumer demand.

This could be accomplished by the Commission using its forbearance authority to relieve ILECs of regulatory requirements affecting broadband.Pursuant to Section 10 of the Telecommunications Act of 1996, the Commission has authority to forbear from any regulation (1) that is not necessary to ensure that charges, practices, classifications, or regulations by, for, or in connection with a carrier or service are just and reasonable; (2) enforcement of the regulation is not necessary for the protection of consumers; and (3) forbearance is in the public interest.[26]The only limitation beyond this analysis is that the Commission cannot forbear from applying the requirements of § 251(c) or § 271 until ithas determined that the requirements of those sections have been fully implemented.[27]

Clearly, the above analysis would apply to most Title II regulation affecting broadband, specifically, but not limited to,§§ 201, 202, 203 (including all tariffing requirements),[28] 251 (excluding §251(c)), 252, 272, and rate regulation.The NTIA should push the Commission for such forbearance.Moreover, the NTIA should urge the Commission to use the necessary and impair analysis of § 251(d) to find that broadband UNEs are not necessary.This should, at a minimum, include removing Line Sharing[29] and Line Splitting[30] UNEs.Implementation of these changes will go a long way toward equalizing competition in the broadband market.

Policies necessary to assure that broadband achieves its true potential, however, will require several steps.The Commission’s actions only apply to interstate services.Broadband is typically thought of in terms of Internet access, which is an interstate service.Broadband will expand beyond Internet access and include services that are intrastate in nature.The same issues discussed in these comments surrounding the negative impacts that federal regulation has had on interstate services apply in kind to state regulation.Accordingly, the NTIA should also encourage states to take a deregulatory approach to broadband.While BellSouth is hopeful that such encouragement will lead to a market policy toward broadband, it believes that at the end of the day a legislative solution will be necessary.

III. Conclusion

The NTIA should work toward policies that will incent rapid growth in advanced telecommunications capabilities.Rapid growth is needed to fuel the growth of the Internet and its positive impact on the economy.Such policies will be best achieved by competition in the market and not past regulatory models.The NTIA should be bold in doing all it can to let fairly matched providers compete going forward on equal terms.

Respectfully submitted,

BELLSOUTH CORPORATION

By its Attorneys

_______________________

Stephen L. EarnestRichard M. Sbaratta

Suite 4300675 West Peachtree Street, N. E.Atlanta, Georgia30375(404) 335-0711

Date:December 19, 2001

[1]Notice, Request for Comments on Deployment of Broadband Networks and Advanced Telecommunications, 66 Fed. Reg. 57941, 57941 (Nov. 19, 2001).

[2]Only recently Nancy Victory, Assistant Secretary, U. S. Department of Commerce, stated that “[t]he Administration is a believer that the opportunities and innovation offered by high-speed networks are crucial to promoting America's productivity and our people's welfare.”Nancy Victory, “Removing Roadblocks to Broadband Deployment,” Speech before the Competition Policy Institute’s Conference (Dec. 6, 2001).

[3]Daniel F. DeLong, As Cable Modem Growth Rate Slows, Can Others Capitalize? (Aug.14, 2001), at http://www.newsfactor.com/perl/story/?id=12779.

[4]See Harris Paper discussion of intermodal competition, § 3.1.“[P]ublic policies that promote intermodal competition are absolutely crucial to the rapid and widespread deployment of broadband access.”

[5]For example, cable modem providers operate virtually free of regulation in the provision of broadband while ILECs are tangled in a web of regulation that is pedantically enforced.

[6]One example of policies currently being considered by the Commission is requiring ILECs to unbundle their packet switching network as a network element pursuant to 47 U.S.C. § 251(c).The Commission is considering this new regulation in spite of having twice determined that unbundling of packet switching is not “necessary” as required by 47 U.S.C. § 251(d).See In the Matter of Implementation of the Local Competition Provisions of the Telecommunications Act of 1996, CC Docket No. 96-98, Third Report and Order and Fourth Further Notice of Proposed Rulemaking, 15 FCC Rcd 3696, 3840, ¶ 316 (1999) (“UNE Remand Order”).

[7]See 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, CC Docket No. 98-146, Report, 14 FCC Rcd 2398 (1999) (“First Report”); 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, CC Docket No. 98-146, Second Report, 15 FCC Rcd 20913 (2000) (“Second Report”); see also In the Matter of Rulemaking To Amend Parts 1, 2, 21 and 25 of the Commission’s Rules to Redesignate The 27.5-29.5 GHz Frequency Band, To Reallocate the 29.5-30.0 GHz Frequency Band, To Establish Rules and Policies for Local Multipoint Distribution Service And for Fixed Satellite Services, CC Docket No. 92-297, Second Report and Order, Order on Reconsideration, and Fifth Notice of Proposed Rulemaking, 12 FCC Rcd 12545 (1997) (“LMDS Order”).

[8]See CIBC World Markets Report, Oct. 23, 2001 (of existing residential households with broadband, 58% have cable modems and 37% have DSL).

[9]See In the Matter of Inquiry Concerning 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, CC Dkt. No. 98-146, Third Notice of Inquiry, FCC 01-223, ¶ 16 (rel. Aug. 10, 2001).

[10]The Commission established certain circumstances when an ILEC must unbundle its packet switching network elements including the digital subscriber line access multiplexer (“DSLAM”).The test to determine when unbundling must occur is set forth in paragraph 313 of the UNE Remand Order.UNE Remand Order, 3838-39, ¶ 313.

[11]See Harris Paper, § 4.4, discussing market uncertainty.

[12]BellSouth realizes that any market inherently contains risks and uncertainties that can never be completely eliminated.The uncertainty caused by imprudent regulation, however, can and should be eliminated from any market.

[13]See Harris Paper, § 2, discussing definition of broadband.

[14]See UNE Remand Order, 15 FCC Rcd at 3835-40, ¶¶ 306-317.

[15]See In the Matter of Deployment of Wireline Services Offering Advanced Telecommunications Capability and Implementation of the Local Competition Provisions of the Telecommunications Act of 1996, CC Docket Nos. 98-147 and 96-98, Third Report and Order on Reconsideration in CC Docket No. 98-147, Fourth Report and Order on Reconsideration in CC Docket No. 96-98, Third Further Notice of Proposed Rulemaking in CC Docket No. 98-147, Sixth Further Notice of Proposed Rulemaking in CC Docket No. 96-98, 16 FCC Rcd 2101 (2001) (“Line Splitting Order”).See also In the Matters of Deployment of Wireline Services Offering Advanced Telecommunications Capability and Implementation of the Local Competition Provisions of the Telecommunications Act of 1996, CC Docket Nos. 98-147 and 96-98, Order on Reconsideration and Second Further Notice of Proposed Rulemaking in CC Docket No. 98-147 and Fifth Further Notice of Proposed Rulemaking in CC Docket No. 96-98, 15 FCC Rcd 17806 (2000).

[16]See Harris Paper, § 4, discussing disincentives for investment in the broadband market.

[17]See, e.g., C. Michael Armstrong, Telecom and Cable TV:Shared Prospects for the Communications Future, delivered to the Washington Metropolitan Cable Club (Nov. 2, 1998) available at <<www.att.com/speeches/98/981102.maa.html. (“No company will invest billions of dollars . . . if competitors who have not invested a penny of capital nor taken an ounce of risk can come along and get a free ride on the investments and risks of others.”)

[18]UNE Remand Order, 15 FCC Rcd at 3839, ¶ 314.

[19]Id. at 3840, ¶ 316.

[20]ILECs have engineered their networks to take advantage of multiplexing capabilities.A multiplexer allows many signals from various loops to be aggregated on to one large transmission path, such as fiber.This avoids having to run a copper loop from every customer’s premises to a serving wire center.A digital loop carrier (“DLC”) system utilizes a link, typically fiber, from the serving wire center to a remote terminal (”feeder”).Copper loops are then distributed from the remote terminal to the customer premises (“distribution”).DSL is a copper based technology; thus, to deploy DSL to a customer served by a remote terminal, the DSLAM must be collocated at the remote terminal in order to access the copper loop.

[21]The technical design of the line card approach involves two circuit packs for use in one type of BellSouth’s DLC system.A dual POTS/ADSL line card, placed in a card slot usually occupied by a POTS-only card, provides for both switched voice and broadband data.ATM cell multiplexing and high-speed transport are enabled on a second card which replaces – and incorporates the functionality of – a remote test common equipment card.The line cards are interconnected to the cell multiplexer through otherwise unused backplane wiring.The DLC system in which this solution is used is a narrowband multiplexer, limited to 64 kilobits per second (“kbs”) throughput in each channel slot.Use of the system for digital access at beyond this rate was neither designed nor envisioned.This solution, nevertheless, is able to identify and exploit backplane resources on the platform to enable per-slot interconnection at rates up to 10 megabits per second (“mbs”).

[22]Depending on the circumstances, a remote DSLAM can cost between $30,000 and $100,000.

[23]As the number of subscribers increases, the integrated line card costs likewise increase.At some point the integrated line card costs will begin to exceed the cost of deploying a separate DSLAM and cabinet.

[24]The Commission has requested comments on whether it should require ILECs to collocate competitors’ line cards within the ILECs’ remote terminal.This concept has been advanced by some CLECs as the most reasonable way for them to provide DSL service out of remotes, thus providing the additional opportunity for them to provide broadband functionality that the CLECs allege ILECs "have refused to provide."This is discussed as if the line card alone will magically enable broadband, and at little or no cost to the owner of the DLC.The reality is that broadband is enabled only when it is connected to the cell multiplexing and transport function, and interconnected into the packet network.That infrastructure is shared by all of the line cards so connected.The relative costs of that sharing are dependent upon the number of line cards in use and on the bandwidth consumed by each.The latter depends not only upon the DSL line speed achieved, but also upon the priority assigned to carry traffic.Given the expressed desires of CLECs to have bandwidth dedicated to their needs in such an environment, costs attributed to their bandwidth usage would likely be much greater than that of ILEC customers, all of whom are served on a best effort basis.BellSouth is highly skeptical of regulators being able to adequately allocate such costs and BellSouth is certain that recovery under TELRIC cost methodology would make the project economically infeasible.

[25]Section 706 of the Telecommunications Act of 1996, Pub. L. 104-104, 110 STAT. 56 (1996), reproduced in the notes under 47 U.S.C. § 157.

[26]47 U.S.C. § 160(a).

[27]47 U.S.C. § 160(d).

[28]Through this forbearance analysis the Commission should find that ILECs are non-dominant in the provision of broadband services.

[29]In the Matters of Deployment of Wireline Services Offering Advanced Telecommunications Capability and Implementation of the Local Competition Provisions of the Telecommunications Act of 1996, CC Docket Nos. 98-147 and 96-98, Third Report and Order in CC Docket No. 98-147, Fourth Report and Order in CC Docket No. 96-98, 14 FCC Rcd 20912 (1999) (“Line Sharing Order”).

[30]Line Splitting Order, 16 FCC Rcd 2101 (2001).