FCC Initiates Broad Rulemaking Proceeding on Data Interconnection

Section 706

Section 706(a) directs the FCC and state regulatory commissions to "encourage the deployment on a reasonable timely basis of advanced telecommunications capability to all Americans." "Advanced telecommunications capability" is defined as "high-speed, switched broadband" transmission of voice, data, graphics and video using any technology. Section 706(b) specifically instructed the commission to conduct an inquiry, by Aug. 8, to determine whether advanced telecommunications capability is being deployed in a "reasonable and timely fashion." The commission must complete its inquiry within 180 days, and must take "immediate action to accelerate the deployment" of advanced telecommunications capability by removing barriers to infrastructure investment if the commission finds that advanced telecommunications services are not being deployed in a reasonable and timely fashion. The NPRM discussed in this memo and a companion Notice of Inquiry (summarized in a separate memo) initiate the FCC's response to this congressional mandate.

FCC Findings and Proposed Findings

Starting a few months ago, Ameritech Corp., Bell Atlantic Corp., Southwestern Bell and US WEST Inc. (the Bell operating companies, or BOCs) filed petitions citing Section 706. They argued that the best way for the FCC to promote the deployment of advanced telecom services would be to deregulate new broadband technologies--such as digital subscriber line (DSL) facilities deployed by the BOCs, and the services provided over these facilities. Such deregulation would include the elimination of the obligations all ILECs have under the act to provide interconnection, collocation, unbundled network elements (UNEs) and resale of these advanced facilities and services. Also, for BOCs, the deregulation would eliminate the current restriction on the provision of in-region interlocal access and transport area (LATA) services.

In response to the BOC filings, the Association for Local Telecommuni-cations Services (ALTS), the CLEC trade association, filed its own 706 petition, arguing that the best way for the FCC to promote advanced telecom services would be to make collocation cheaper and easier to obtain, to establish digital UNEs and to ensure that ILECs had to interconnect to CLEC advanced facilities and resell advanced services.

The FCC responded to the petitions in two ways: It reached specific conclusions concerning some 706 issues, and reached proposed conclusions on others. For the proposed conclusions, it seeks comment from interested parties, and will adopt final rules based on these comments. The conclusions and proposed conclusions are summarized below:

FCC Findings

• ILEC data services and facilities are fully subject to the interconnection and unbundling requirements of the Telecom Act.
• ILECs must provide CLECs with unbundled loops capable of providing high-speed digital signals (including integrated services digital network, or ISDN; asymmetric digital subscriber line, or ADSL; high-bit-rate digital subscriber line, or HDSL; and digital speech interpolation, or DSI).
• ILECs are required to provide fully conditioned digital loops, including loops that use digital loop carrier (DLC) equipment and other remote concentration devices within the loops.
• ILECs must resell advanced services to CLECs at wholesale discounted prices.
• The FCC denies request of the BOCs for deregulation of their broadband services and facilities, and specifically finds that ILEC DSL facilities and services are subject to the Telecom Act's interconnection, unbundling and resale requirements, and to the restriction on interLATA service (until in-region long distance authority is granted pursuant to Section 271 of the act).

FCC Proposed Findings ILEC Data Subsidiaries

• The FCC has tentatively concluded that ILECs may spin off data subsidiaries that are not subject to the same interconnection and unbundling requirements that apply to the ILEC.
• These affiliates must have separate officers, directors, employees and books of account. Additionally, affiliates may not share credit with the parent.
• The affiliate must interconnect with the ILEC parent through tariff or an approved interconnection agreement that is available to CLECs.
• Affiliates that provide access services will be unregulated. That is, they can provide service on an untariffed basis.
• To the extent that affiliates deploy DSL and other digital equipment, they will not be subject to the interconnection and unbundling obligations of Section 251(c) of the Telecom Act that apply to ILECs.
• Instead, affiliates will be subject to the far less stringent interconnection requirements of Section 251(a) and (b), which apply to CLECs and all other local service carriers.
• The affiliate will not be obligated to resell advanced services to CLECs at the wholesale discount rate prescribed by state regulators (typically about 20 percent).
• The FCC seeks comments on specific rules that spell out the terms of this arm's-length relationship, and that provide safeguards against ILEC discrimination in favor of its affiliate.
• The FCC also seeks comment on whether smaller ILECs should be granted more flexibility to avoid interconnection, unbundling and resale obligations.

Changes in LATA Boundaries for ILECs

The FCC tentatively concludes that it should modify the existing definition of LATAs to promote the provision of high-capacity services to rural and residential customers. The FCC also asks for comment on the following issues:

• The extent to which it can recognize exceptions to LATA boundaries.
• How changes to LATA boundaries may promote advanced services.
• What other actions the FCC may take, consistent with the Telecom Act.

Unbundled Loops and Other Elements

The FCC seeks comment on its proposal to revise its rules regarding unbundled loops to:

• Ensure that ILEC operations support systems (OSSs) provide CLECs with information about the availability of digitally conditioned loops capable of carrying DSL and other digital services.
• Minimize interference in loops that carry high-capacity services, such as ADSL, in a way that does not exclude CLECs from obtaining unbundled high-capacity loops.
• Define unbundled loops to include subloop elements (including providing unbundled access to DLC, remote DSL mutiplexers and other concentration equipment deployed in the loop, outside the central office). The FCC seeks comment on how unbundled loops using these concentration systems can be provisioned.

The FCC also asks for comment on whether it should change its unbundling rules to increase the availability of UNEs, or to define UNEs on a service-by-service basis.

Resale

The FCC tentatively concludes that all ILEC services provided to residential and business users--including Internet service providers (ISPs)--are fully subject to the resale obligation under Section 251 of the Telecom Act. This finding would apply to the DSL-based high-speed Internet access services now being introduced by the ILECs.

Collocation

• The FCC tentatively concludes that it should adopt additional national standards to define minimum acceptable standards for collocation.
• The FCC tentatively concludes that it should eliminate any restriction on a CLEC's ability to collocate equipment that serves a switching function.
• The FCC proposes, however, to retain a restriction on the collocation of equipment used to provide enhanced services. (Note, it is not clear if such a restriction would prevent a CLEC from collocating Internet routers or other equipment that provides Internet protocol, or IP, conversion.)
• The FCC notes that its current rules require ILECs to permit a collocated CLEC to cross-connect its equipment to the equipment of another collocated CLEC, and seeks comment on ILEC practices that restrict such cross-connection.
• The FCC tentatively concludes that ILECs should make space-saving collocation arrangements available, including collocation cages shared among numerous CLECs and "cageless" collocation that requires a minimum of about 10 square feet, instead of 100 square feet.
• The FCC seeks comment on whether ILECs can require escorts or other security measures for such alternative collocation arrangements.
• The FCC seeks comment on other methods of reducing the cost of collocation.
• If an ILEC claims that no space is available for physical collocation, the FCC proposes that CLECs should have the right to inspect the central office and verify space exhaustion.
• Finally, the FCC seeks comment on how virtual collocation can be made more useful to CLECs.

Jon Canis is a partner in the communications practice group of Kelley Drye & Warren LLP. He can be reached at (202) 955-9664.

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