SEIDENBERG SAYS UNE-P IS ‘MANAGEABLE ISSUE’ FOR VERIZON
As Bell companies lobby regulators to stop competitors from using unbundled network element platforms (UNE-Ps), Verizon CEO Ivan Seidenberg told investors Mon. that UNE-P competition was “manageable” in short term because his company could “offset some of the margin pressures.” He told Morgan Stanley’s Global Communications Conference in Miami that “the real issue is the insidious damage to the industry from the long-term effect” of UNE-P: “UNE-P is the single most bizarre policy imaginable.” Even if UNE-P benefits local competitors in short term, “it is a destructive policy for the whole industry long term,” he said: “No matter what you hear, as a fundamental business strategy, it’s not going to work. Regulators thought it was a good idea because they had a static view of the industry” and didn’t contemplate competition from other technologies such as wireless.
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“The FCC, at least, has come up with an intellectually honest recognition” that UNEs have a negative long-term effect on industry “because of this technology displacement” problem, Seidenberg said. “State commissions don’t get it,” he said. “They don’t have a clue because they are trapped” in an old view of regulatory policy.
Bell companies have been urging regulators to eliminate competitors’ ability to use UNE-P as entry strategy and some analysts have cited financial harm to Bell networks as result of competitive pressure from UNE-P entry. Competitors using UNE-P devise their networks by leasing parts of Bell company networks at low-cost TELRIC prices. Seidenberg said FCC had ability to eliminate UNE-P through variety of actions such as rejecting switching as UNE element. However, he assured investors that UNE-P wouldn’t hurt Verizon’s finances right now because “we know how to absorb” losses caused by UNE-P competitors.
On other regulatory issues, Seidenberg said: (1) Although FCC is continuing to press its legal case in NextWave controversy, he thinks there’s “momentum” for Commission to release auction winners such as Verizon from their remaining payment obligations. He said he expected FCC to recognize “the untenable position of holding companies” to their commitments. (2) By end of year, Verizon expects to have filed Sec. 271 applications at FCC for every state, with agency action on remaining states such as Md. occurring early next year. In answer to question, Seidenberg had harsh words for troubled companies such as WorldCom. When “Arthur Andersen ran into trouble, the government shut them down,” he said. “I don’t know why the government doesn’t do the same thing with some of these companies in bankruptcy now.”
AT&T spokeswoman said it was “hypocritical for Verizon to deride UNE-P when the Bells offer long distance by renting all their network facilities from AT&T and others at steeply discounted wholesale rates.”