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TC 310 May 21, 2008. Applying the 1996 Act. Current Event. FCC investigating cell phone contract termination Cancel early Reduce over time Take state jurisdiction away Proposed by Verizon What concepts can we apply?. UNEs. Unbundled Network Elements What are network element examples?
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TC 310 May 21, 2008 Applying the 1996 Act
Current Event • FCC investigating cell phone contract termination • Cancel early • Reduce over time • Take state jurisdiction away • Proposed by Verizon • What concepts can we apply?
UNEs • Unbundled Network Elements • What are network element examples? • Importance of UNEs • Economies of scale prohibit entry without • Network effects prohibit entry without • Interconnection not sufficient for competition • Application of strong essential facilities doctrine
UNE-L • Refers to just the loop/transport being leased • ILEC offers wholesale loop/transport lines at TELRIC prices • CLEC leases these lines, connects to their own switch. • Just loop leasing requires collocation • Loop/transport known as enhanced extended links • Economically more efficient. • Facilities based competition
UNE-P • Refers to the leasing of the entire platform • All elements of the ILEC are leased by CLEC • Leased based competition • Rebranding of ILEC services • Allowed to offer their own pricing platforms • Not offering innovative services • Similar to resale, but.. • Repackaging • Cheaper
Advantage UNE-P • UNE-P over UNE-L • UNE-P over Resale • Resale based on ILEC retail pricing • UNE-P based on TELRIC pricing • 1996 Act aimed at UNE-L • Innovative services • UNE-P good for CLECs, bad for ILECs and customers?
Fights about UNE • ILECs fight for competition? • UNE-P adds no value, not real competition • No incentive for investment • Hurts ILECs; TELRIC pricing • CLECs • UNE-P allows competition where it would not be • Doesn't hurt ILECs • Near structural separation between retail and wholesale ILEC arms
Local Competition Order • 1996 FCC Report and Order, dealing with Act • All elements available for UNE • Challenged • Really resale end around • Failure of impairment standard of section 251 • Impairment sticks • FCC must decide which elements are necessary to competition, will impair CLECs • Court orders FCC to be more specific
UNE Remand Order • FCC tries again in 1999 • Removes operator/directory assistance • Adds more specificity to line elements • D.C. District invalidates again • Decision known as USTA I • Unbundling is not without costs • Innovation for ILECs and CLECs suffers • Impairment is a balance to leasing rights, FCC needs to find balance.
Triennial Review Order • 2003 FCC attempt to deal with UNE problems • Pushes onto States • Impairment is when non-bundling makes entry uneconomical. • UNE-P favored by States • Hot Cuts are foundation • Too difficult for ILEC to do this without major costs to CLECs and customers
USTA II • ILECs argue Triennial Review Order violates USTA I court order • District court sides with ILECs again • Violated obligations by subdelegating • Definition of impairment still in violation of USTAI • FCC makes not of this in the Order • Hot Cut orders do not have empirical support • Supreme Court does not grant certiorari
USTA II Repercussions • Switches removed • UNE-P invalidated? • States still applying • Should be preempted, impairment decision of FCC • UNE-L should be expanding • CLECs just leaving • AT&T not seeking further customers following USTA II • ILECs Win • Applies only to circuit-switched networks, old tech
Why Important • Battle between FCC and Courts over interpretation • Courts balance FCC against intent of Congress • FCC more competition biased than Congress? • Repercussions are minimal • Signal of phasing out of PSTN • Signal of convergence