Front Page: AT&T, WorldCom Consider Alternatives to UNE-P

AT&T Corp. and WorldCom Inc. have fought hard in recent months to preserve regulations that would allow them to resell local telephone service to millions of American households through the UNE-P. Yet they both agree UNE-P is a temporary fix. The phone giants are considering ways to compete with the Bells if they were required to invest in their own switches. FCC commissioners were scheduled to meet Feb. 13 to vote on a proposal that could change UNE-P regulations.

WorldCom already has commissioned an economic study to analyze how many customers it would need to justify a specific network investment. The threshold: 25,000 residential lines, according to a letter WorldCom filed Jan. 8 with the FCC. Donna Sorgi, WorldCom's vice president of federal advocacy, stated in the letter the Bells first must address operational issues, such as improving the process through which the incumbent phone company switches a customer to a rival's network. State regulators should take the lead role in determining where CLECs are impaired without the resale platform, she says.

What MCI/WorldCom, AT&T and other phone companies are considering is the viability of leasing -- at a UNE price set by state regulators -- the incumbent's local loop (UNE-L). "If certain operational and economic barriers are addressed UNE-L might prove to be a feasible alternative to UNE-P in some central offices, particularly those with relatively large numbers of residential lines," Sorgi says.

"But the nature and magnitude of the barriers new entrants face vary from state to state and from central office to central office, making a uniform rule on whether competitive LECs are impaired without access to UNE-P impossible and indefensible."

There were nearly 7.5 million UNE-P lines in place as of June 30, 2002, comprising about a third of the 22 million CLEC switched access lines.

SBC Communications Inc. welcomed WorldCom's filing as a public acknowledgement that a facilities-based strategy is possible in the local residential phone market. SBC told the FCC in a filing its own economic analysis "reveals that CLECs can earn a positive margin providing facilities-based residential service in wire centers with 5,000 or more lines."

AT&T, which plans to offer American households local phone service in 14 to 17 states this year, also is looking at ways to serve customers over its own network.

"We do not see ourselves being dependent on UNE-P forever," AT&T Chairman and CEO David Dorman told analysts in a fourth quarter conference call.

With some 165 voice switches and metro fiber networks in 90 cities, AT&T has an eye toward other technologies besides UNE-P, Dorman says. AT&T's chief executive says wireless and fixed wireless technology show promise, though the technologies remain two to three years outside the financial planning cycle.

AT&T is lobbying regulators to "have more streamlined automated processes around the provisioning of UNE-L," Dorman says.

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