INDUSTRY DEBATES MPOWER'S ALTERNATIVE TO ‘PICK & CHOOSE’ RULE

However, Assn. of Communications Enterprises (ASCENT) said petition was “predicated on a false and naive market view and ill- advised from a public policy standpoint.” In comments filed July 3, ASCENT also said petition was procedurally flawed because it didn’t meet criteria for regulatory forbearance, as sought by Mpower.

CLECs in general expressed fear that Mpower proposal would lessen ILEC incentives to provide uniform competitive access, instead encouraging incumbents to enter into “sweetheart deals” with particular CLECs. Covad urged FCC to “consider the implications of Mpower’s forbearance request for the broader competitive industry.” Covad said Commission “should be wary of any attempt to permit an incumbent LEC to pick a ‘chosen’ competitor who will receive favorable terms and conditions.” Covad also questioned FCC’s authority to grant Mpower petition because Telecom Act gave states authority to review interconnection agreements.

Focal Communications said proposal would “in practical terms eviscerate the ‘pick and choose’ requirements.” Focal said that “although Mpower proposes these ‘FLEX contracts’ in addition to the standard interconnection agreements, such a result will never occur.” ILECs would insist that every new agreement be deemed FLEX contract “and will insert ‘poison pills’ to ensure that each ‘FLEX contract’ will only be… utilized by the negotiating CLEC,” Focal said. As result, ILECs would have “substantial power to select favored CLECs for which to provide ’sweetheart deals’ and discriminate against other CLECs in the negotiating process,” company argued.

Sprint said it didn’t think proposal would “result in the kind of… partnerships envisioned by Mpower” even though it agreed that “more cooperative business relationships” between ILECs and CLECs would improve services to end users. Sprint said Mpower was too optimistic in thinking ILECs would favor such agreements because they would increase ILECs’ wholesale business. Any wholesale revenues generated from CLECs “are likely to be far less than the retail revenues an ILEC would lose through the switch of its local service customers to a CLEC,” Sprint said. “Thus, ILECs have little or no incentive to voluntarily seek out additional wholesale business.” It also said that while FLEX contracts would be available to “similarly situated” carriers, “a FLEX contract can be structured with sufficient specificity that no other carrier could be considered to be ’similarly situated.'”

ILECs gave guardedly favorable responses to Mpower proposal, saying they liked idea but only if certain conditions were met. Verizon said it had “no objection” to concept as long as: (1) “There is no compulsion for a carrier to enter into such negotiations.” (2) Such agreements “cannot be used in evidence in any federal or state proceeding.” (3) Agreements aren’t “subject to regulatory enforcement proceedings.” (4) “Adoption of this policy [doesn’t] affect any separate proceeding before the Commission addressing elimination of unbundled network elements.” (5) Facilities deployed under FLEX contracts aren’t “subject to the unbundling requirements of Sec. 251 of the Act or any conditions imposed by federal or state regulators in approving carriers’ mergers and acquisitions.”

BellSouth said “freely negotiated contracts could produce terms and conditions that could potentially benefit both the CLEC and ILEC.” Company said it agreed with Mpower “that the pick and choose provision undermines the full measure of the bargain that was negotiated between the parties.” Negotiations are made up of “give and take” and “allowing a carrier that was not a part of the negotiation to reap the benefit of a good clause without the balance of other clauses that disrupts the concept of negotiation,” BellSouth said. However, it also placed conditions on its support: (1) “FLEX contract mechanism must be completely voluntary between the parties” because standard interconnection agreement mechanism would remain in place. (2) It must be “separate and distinct from interconnection agreements that ILECs enter with CLECs” under Secs. 251 and 252 of Telecom Act. (3) Contract must be “free of all obligations of Secs. 251 and 252.”

Qwest said it agreed that “most reasonable way” to encourage competition was to establish “structure which encourages ILECs and CLECs to deal voluntarily on a wholesale basis.” “Overriding purpose” of Telecom Act is to adopt “procompetitive, deregulatory regime,” Qwest said, and pick & choose rules “are plainly not deregulatory.” FCC ought to at least open proceeding to see if its rules should be modified, Qwest said.