FCC Proposes to Further Curtail UNEs

The FCC voted on November 22 to issue a Notice of Proposed Rulemaking that will largely eliminate the use of unbundled network elements (UNEs) by competitors. This was a surprise order because there was not the usual chain of aggrieved parties on the record asking for the docket – it seems to be unprompted and generated by the FCC directly. It’s been well known for decades that the large telcos have wanted to get rid of UNEs and they likely have been pushing for this behind the scenes and off the record.

UNEs are portions of the telcos copper and dark fiber networks that have been made available to competitors since the Telecommunications Act of 1996. There are two primary uses of UNEs today. First, competitors buy a copper UNE and deliver better DSL than the telcos using modern DSL technology. I know of cases where competitors are offering several hundred Mbps speeds to businesses by bonding multiple UNEs. Like every product that competes with cable broadband, the use of DSL UNEs has been declining, but there must still be hundreds of thousands, if not a few million homes and businesses in the country served by newer DSL technology on UNEs.

UNEs are also used by competitors to interconnect to the big telco networks. There was a movement a decade ago by the FCC to transition the telecom network to all-digital – but that never happened. Competitive carriers must buy still buy traditional T1 and T3 UNEs (28 T1s) to interface with the big telco networks. CLECs (Competitive Local Exchange Carriers) that offer voice services use these UNEs to connect to the public switched telephone network. I doubt the FCC understands the extent to which such connections are required by the big telcos – and the extent that there might not be alternatives available to CLECs. Eliminating these UNEs is particularly puzzling since the upcoming RDOF grants will require all grant recipients to offer voice services – it would be ironic if grant recipients are unable to connect voice from these new networks to the rest of the world.

This proposed order will eliminate the following kinds of UNEs:

  • DS1 (single lines) and DS3 (T1s) loops in counties previously deemed competitive by the FCC. The exception is that DS1 single line loops will still be available in rural areas – presumably using the flawed FCC maps that define areas without broadband. In North Carolina where I live, this would eliminate UNEs in 67 of the 100 counties. I’m familiar with many of the counties on the list and I think the folks in many of these counties like Moore and Stanley will be surprised to find that they are considered as competitive.
  • DS0 loops in urban census blocks. These loops are also used to provide DSL.
  • Subloops in the same areas that eliminate other kinds of loops. Subloops are connections to homes inside a subdivision if that subdivision is served by telco DSL from the entrance to the subdivision.
  • Dark fiber transport in wire centers within a half-mile of alternative fiber. Unless ‘alternative fiber’ is defined carefully, this could eliminate dark fiber when there is no actual alternative.

The NPRM would require a 3-year transition for anybody using the UNEs. I’m not sure what transition means since a carrier can either use a UNE or they can’t. It seems this would give competitors three more years to continue to serve customers before they lose the UNE connection.

The FCC is painting the NPRM as part of its ongoing effort to eliminate unneeded regulations. However, UNEs are not unneeded – there are competitive carriers using UNEs to deliver products that customers want to buy. This FCC has always said that the main thrust of eliminating regulations is to increase competition. This particular order will decrease broadband competition and will force a lot of customers to find a more costly broadband alternative. The FCC should not be actively trying to eliminate UNEs if homes are happy with 25 Mbps or 50 Mbps broadband delivered on copper UNEs.

The big telcos have been trying to eliminate the requirement to unbundle their network since the 1996 Act. The FCC eliminated some UNE requirements earlier this year, and in that docket, the FCC said they didn’t eliminate broadband UNEs because the market still valued them. Now, barely half a year later, the FCC has done an about-face and wants to throw DSL competitors out of urban and suburban markets.

It’s also an odd order from a financial perspective. The big telcos will lose the revenues if UNEs disappear – they are a significant source of revenue on old copper. Customers will be tossed off services they like. The real beneficiaries of the order are the cable companies that will pick up the displaced customers – which is an odd thing for the FCC to be pushing when the cable companies are inching towards monopoly.

Control of the Future Voice Network

FCC_New_LogoThe FCC is looking at how to transition from the traditional TDM-based PSTN to an all-IP telephone network. A number of carriers have submitted proposals that provide their vision of an all-IP network. Today blog looks at AT&T’s vision of the future IP network.

AT&T has proposed to the FCC that there be a handful of major switching hubs created in the country. Every carrier would then send their voice traffic to these hubs to be sorted and handed back to the various terminating carriers. Their argument is that the whole idea behind the IP transition is that the network be made as efficient as possible; they are promoting this idea as the simplest network to implement.

But is it the most efficient? Over the years I’ve done a lot of traffic engineering, meaning that I’ve helped companies analyze where their voice traffic comes from and goes to. What I’ve seen is that approximately 80% of voice traffic for most companies stays in a relatively small circle of perhaps 60 miles. This distance can vary a bit by company depending on how far away they might be from a major metropolitan area, but this basic traffic rule seems to apply pretty much everywhere I’ve looked.

So let me first look at the practical application of what AT&T is proposing. One would have to assume that if there was only a handful of nationwide interconnection points that they would be put in the same places as the major internet hubs – Atlanta, Chicago, Washington DC, New York City, Dallas, etc. What this idea means is that states not near to those hubs—say Montana, Nebraska, Maine, etc. would have to ship all the voice traffic from their state to the nearest big hub and back again.

While it might be more efficient to have only a few hubs, it certainly would not be efficient from a transport perspective. Somebody has to pay for all of that transport to and from the main hubs, and that is the real purpose behind the AT&T proposal. Under their proposal carriers other than them would pay to have all traffic brought to these main hubs. That is a major change from the way the industry works today.

Today there are two different sets of transport arrangements—one for regulated telcos and one for competitive CLECs and other kinds of carriers. Regulated companies today provide joint trunking between each other. For instance, if there is a fiber route between AT&T and another telco, AT&T generally owns the part that is within their territory and the other telco owns the part in their own territory. Sometimes this is negotiated differently, but under this arrangement both sides bear some of the cost of carrying voice traffic.

CLECs and other competitive carriers have a different situation. CLECs are allowed by the Telecommunications Act of 1996 to establish a point of interface (POI) at any technically feasible spot within a LATA (or region). Once that point is established, the CLEC is responsible for all costs on their side of the POI and AT&T (or Verizon or CenturyLink) is responsible for the costs on the other side of the POI.

AT&T’s suggested new network gets rid of both of these arrangements and instead moves all of the points of interconnection to the small handful of locations, and in doing so shifts 100% of the cost of the transport onto other carriers.

In a further money grab, AT&T would (as the assumed owner of these large hubs) charge a fee to other carriers for handing traffic from carrier to another. These fees exist today and are called transit fees. But today transit fees are charged on a relatively small percentage of voice calls since there are no fees charged for all of the jointly-owned arrangements I described above. Instead, under this new arrangement there would be a transit fee charged for every call that is handed from one carrier to another.

AT&T’s proposal is ridiculous for several reasons. First, the transit fees are not cheap and they cost more today than the traditional access charges that the FCC has been trying to eliminate. So AT&T’s proposal would increase the cost of making voice calls. The proposal is also a blatant attempt to shove all of the cost of carrying voice traffic to somebody other than AT&T. And finally, it forces companies to carry calls a much greater distance than they go today. This likely will lower call quality and increases the danger of the voice network going down due to a fiber cut or other network problem.

There is a much simpler alternative to what AT&T is suggesting, which is to let carriers negotiate how and where they hand off traffic. There are already huge numbers of local and regional interconnection points in existence, most established to hand-off local traffic in the local market. Carriers should be free to continue to use arrangements that work and with which they are happy. Think of these local arrangements as voice peering arrangements and they quickly make technical sense. Nobody is going to be unhappy if local connections transition to IP instead of TDM. But making the IP transition doesn’t mean that the whole nationwide network has to be massively reorganized. That is far more inefficient and costly than letting carriers find their own solutions.

Big Carriers Wear Many Hats

hatI have seen several articles lately that note how carriers like AT&T and Verizon play both sides of the regulatory fence. But this is something that industry insiders who work with these carriers have known for years.

These articles talk about how these carriers are very good at picking and choosing their arguments based upon the fact that they are regulated in multiple ways. Both AT&T and Verizon are unique in the industry because they are certified in almost every way possible in the carrier world: they are incumbent regulated telephone companies; they are a wireless carriers; they are long distance companies; both of them operate as a CLEC in some markets where they serve businesses not in their telco footprint; there are times when they are what is called a carrier’s carrier, meaning they sell wholesale connections to other carriers; and finally, they provide broadband which they deem to be fully non-regulated.

When one of these large carriers makes a statement, the first thing I have always asked upon reading it is which one of these different regulated entities within the company is doing the talking. Each one of those types of entities operates under different rules and this often gives leeway to their policy people to say something that might be truthful for one part of their company and yet be stretching the truth if applied to another.

A lot of people, even those in the industry assume that these carriers lie a lot, when in many cases they are just doing this regulatory shuffle. I have seen this same behavior for decades and I have come to understand that generally what these companies say is the truth, at least for one of the many hats they wear. The trick is to know who they are talking for, because that let’s you then respond to them properly when you need to get them to do something. But this behavior drives people crazy who are not from the industry and they just think these companies lie a lot.

On a practical note this is something I run into all of the time. For example, I help clients purchase connections to AT&Tat places like tandems. One would think that the cost to connect to an AT&T tandem would be the same for everybody, but it can vary widely depending on your own regulatory status and upon which AT&T entity you are buying from. For instance, if you buy from AT&T the phone company then you buy special access connections at tariff rates. However, if you are a CLEC then you might be able to buy at rates from interconnection agreements. If you are carrying wireless traffic you might be able to buy from yet a third set of rates. If you are a large business you can buy either from AT&T the RBOC or from AT&T the CLEC. If you are large enough you can probably negotiate unique rates that are contractual. And AT&T is very good at trying to get you to buy a more expensive connection than you might be entitled to. It’s a very confusing puzzle that comes from the fact that different parts of AT&T are regulated differently.

Several of the articles I saw talked about a recent interaction between AT&T and the FTC. The FTC sued AT&T because they have been throttling their unlimited wireless data customers for years. This has been widely covered in the press. When an unlimited customers hits some threshold like 5 GB of data for month, their speed is slowed down to the point of barely working. The FTC is tasked with monitoring false or misleading advertising and they say that these plans are not unlimited if the speeds are too slow to use.

But AT&T is claiming that the FTC has no authority to sue them. They say instead that it is the FCC that should be investigating them. Basically, by this claim AT&T is saying that they are a common carrier and subject to Title II rules, which would give the jurisdiction of the case to the FCC.

But wireless data is not subject to Title II regulation. That might change in February if the FCC decides to regulate wireline and broadband data under Title II as part of the net neutrality order. So it’s very interesting to see AT&T claiming in the FTC suit that they are a common carrier. Because for wireless data they clearly are not regulated today by the FCC. But most of the rest of their business is covered by Title II.

You know how I said that most of the time you can figure out which entity is doing the talking if you think it about long enough? This is not one of those times, and sometimes they just lie.

AT&T Wants to Sell its Abandoned Copper

telephone cablesOn May 28th AT&T made an ex parte presentation to the FCC concerning some more of its ideas about the upcoming conversion of the current PSTN to an all-IP network. Most of this presentation is a very straightforward primer on how the copper network is structured today and what AT&T’s obligations are in terms of having to unbundle and offer various parts of the network to competitors as unbundled network elements.

But the kicker comes on the very last page of the presentation and is titled “AT&T Proposes to Sell its Retired Copper to CLECs” where they describe how they would offer abandoned copper to other carriers. You can see this Powerpoint here.

Let me put this into context. In Docket FCC-11-161A1 the FCC kicked off the process to begin the transition of the PSTN from today’s TDM based technology to an all-IP network. The FCC is proposing that carriers get together to replace the network that used today to interexchange voice traffic between them.

But AT&T has taken the opportunity to open the discussion of how they might be able to walk away from their old copper. In network terms, AT&T’s copper network is called their distribution network, meaning the network that they use to get from their central offices to customers. The FCC has never expressed any interest in requiring that the distribution networks should become all-IP. There are still millions of miles of very serviceable copper, and with newer technologies like G-Fast any copper in good condition can deliver pretty decent broadband speeds.

But AT&T keeps using this regulatory process to lobby the FCC to let them start walking away from customers on copper. Last year they said that they wanted to walk away from millions of copper lines and that in rural areas they plan to instead serve people using cell phones. Anybody who has tried to find bars of data on their cellphone in a rural area can tell you that there are huge parts of the geography in this country where there is no cellular data service. So what AT&T is really telling the FCC is that they want to abandon rural America.

In this presentation AT&T comes along with another idea to try to soften the FCC on this topic. This slide shows that they plan to sell abandoned copper to CLECs, which is their way to assure the FCC that these customers won’t really be abandoned when AT&T walks away. But this is incredibly cynical and supposes that any CLEC would actually want their old copper. There are a lot of practical issues involved in what AT&T is proposing that would not make this a very attractive business plan for a CLEC.

  • They want to sell the copper but not the customers and not the central office. There are plenty of companies who would be interested in buying the whole shebang, but AT&T wants to keep everything in the office that is served with fiber and just sell the old wires. This means the new CLEC would start on day one with no customers or revenue.
  • AT&T would require a CLEC to operate this copper from a collocation inside their office. This is incredibly difficult and costly. Collocation rules require CLECs to use costly paperwork to make any change inside of an AT&T central office. Doing something as simple as changing a power supply requires a detailed application and waiting for AT&T’s approval. In a case where a CLEC bought all of the copper in an office this paperwork would make it impractical to act competitively.
  • I have no idea how this would be practical on hybrid loops, meaning customers who are served both on fiber and copper. A good example would be a subdivision where AT&T has built fiber to the front of the subdivision and then jumps onto copper to get to homes. That kind of copper cannot be accessed from a collocation in a central office but requires an even more costly collocation where a CLEC has to build an access cabinet next to the existing AT&T one in the field. Because of this almost nobody competes today on hybrid loops.
  • AT&T wants CLECs to take over the full cost and maintenance of the old copper. That is mind-boggling, particularly in rural areas where this copper has been ignored and is in bad shape. AT&T and Verizon basically walked away from rural areas decades ago and shut down business offices, got rid of most technicians and stopped making new investments or even spending for normal maintenance. Look at the mess that Frontier got when they bought West Virginia from Verizon to understand the condition of rural copper.

AT&T is trying every tactic they can think of to make the FCC think it’s a good idea to let them walk away from rural copper. I can promise if they do so that there are going to be a whole lot of customers who will go dead and find themselves with no telephone or data service. If AT&T really wants out of the rural business they should sell the whole exchanges as Verizon has done. The idea of keeping the best part of their offices and only shedding the old copper is one of the more hair-brained ideas I’ve ever heard from AT&T. I can’t imagine any CLECs that will sign up for this idea. I really don’t think AT&T thinks this will work, but they are just hoping that the FCC staff is naïve enough to feel good about this if they think that abandoned customers will have an alternative.