Front Page: Courts' UNE Rulings Add Direction to Powell Agenda

Recent federal court action has left competitors to the ILECs more certain about the pricing structure of unbundled network elements only to find themselves less certain as to what they'll find inside the UNE basket.

First came the U.S. Supreme Court decision, May 13, upholding the FCC's rules pertaining to UNE pricing, known as the total-element long-run incremental cost (TELRIC) methodology. Then, a week and a half later, the U.S. Court of Appeals for the District of Columbia dealt a blow to competitors' efforts to convince the FCC not to narrow the range of UNE options, saying the whole rationale underlying the commission's current approach to deciding whether a network element should be unbundled is flawed fatally.

Officials at competitive lobbying organizations drew as much hope from the developments as they could, on the one hand lauding the Supreme Court ruling and, on the other, dismissing the appeals court ruling as barely relevant. The TELRIC decision was a big win for competitors that have been living under a cloud of uncertainty as they have fought to prevent the commission's pricing scheme from being overturned. TELRIC pricing factors in future cost efficiency gains as well as the initial costs of state-of-the-art equipment rather than actual costs of legacy gear. Adding to the competitors' victory, the court also upheld commission rules that require ILECs to bundle elements when asked to do so by CLECs, even when the ILECs normally don't bundle those items.

"Finally, this five-year battle, which has hindered the development of true competition, can come to an end," says H. Russell Frisby, Jr., president of the Competitive Telecommunications Association. CompTel is "especially gratified" the court has confirmed the FCC's power to require UNE combination, he says, adding, "We hope the FCC keeps this ruling in mind as it considers its Triennial Review."

But the Washington appeals court ruling, coming as it does in the midst of that review, appears to give FCC chairman Michael Powell added authority to implement new UNE rules that CompTel and its allies strenuously have sought to prevent. The court overturned and remanded for reconsideration the FCC's rules for determining what ILEC network elements must be offered on an unbundled basis. Making matters worse for competitors, the court also vacated the commission's rules requiring ILECs to share voice lines for CLEC delivery of DSL services.

Competitors put the best spin possible on the bad news, suggesting, in Frisby's words, that the court order was "simply a sideshow," since the commission already was revisiting the unbundling rules as part of its triennial review and the broader broadband initiative. "The Court of Appeals did not disagree with the list of unbundled network elements," notes John Windhausen Jr., president of the Association for Local Telecommunications Services. "It simply questioned the scope of the FCC's competitive analysis in explaining its decision. Except for line sharing, the unbundling rules were not vacated. So there is little immediate impact of the court's decision." 

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