TELECOM COMPETITORS CALL FOR COOPERATION IN INDUSTRY

Davis said states should continue to move in the procompetitive direction, but said “states need to know that we are around and involved and know what we want.” She said she had “a lot of confidence in the state regulatory process… States are a very effective mechanism to get implementation, so you'll see a lot of state activity.” ITC DeltaCom Vp Jerry Watts said: “If you think about it in terms of the war in Iraq, [FCC Chmn.] Michael Powell and the FCC are [like the] Defense Department, and state commissions are [like] commanders that have to be on the ground.” Davis said Covad intended to “use the state TRO process to get line-sharing issues resolved.” She said the company intended to pursue line sharing and “ILECs trying to get good commercial deals from them… [CLECs] should create business incentives for ILECs to deal with us, that’s how you do business.”

Russell Merbeth, Burch Telecom federal policy counsel said state commissions were “extremely [careful] of what sort of impact the release of switching will have on customers. I feel like we've spent a lot of time worrying about” what is ahead, but “it’s over, the order is to some degree final. We have to get down to business we have in front of us, and states are a good place to be with all these questions.” Watts said most of commissions had “clear understanding of how important UNEs are to competitors… The bias that exists will not overcome most state commissions’ feeling” that consumers will be hurt if they don’t meet the demands of competitors. Meanwhile, he said the CLEC industry was “doing good work to bring forward factual things for the record that supports the outcome we are trying to get.”

“Uncertainty [in the broadband environment] is part of our foreseeable future,” attorney Todd Daubert said. He said courts would “more than usual play a role” in the broadband regulatory process as the changes made in the TRO were “more revolution than evolution.” However, he said the recent 9th U.S. Appeals Court, San Francisco, decision on cable would have a “great impact” on DSL regulation: “You'll see some shifting in the way the FCC will access this issue.” Daubert said that to succeed in the broadband market “you need to understand your market and be flexible.”

Davis said this year was “the first year that the number of narrowband consumers actually declined.” At the same time, she said, broadband Internet usage was “expanding. There is business out there. So, if you are an ISP provider, you need to think of” moving to the broadband market. Meanwhile, she said, Covad was “going to do a lot of line splitting, and while it’s not a substitute for line sharing, it’s a substantial” business resource. She said the company also planned to get into deals with the Bells by providing them with incentives to get access to hard fiber loops.

There also is a “tremendous amount of uncertainty” when it comes to VoIP issues, attorney Jacob Farber said. He said the FCC had to address the issue of what VoIP was: “These are very thorny issues… There is a money issue, too, because one of the questions is what to do with universal service… The FCC has a lot of thinking to do.”

Responding to a question on how competition should be defined, Farber said: “The mechanism for defining when competitors don’t want UNEs is when they don’t want to buy them… Obviously, it’s not the world we are living in.” MCI Dir.-Federal Advocacy Richard Whitt agreed: “It should be left up to the market.” Davis criticized the FCC’s decision on line splitting as a substitute for line sharing, saying the Commission should have considered that “only 8% of lines in America are served by competitors, and 92% by ILECS.”

As for Universal Service, Daubert said the FCC had “been trying to deal with symptoms, rather than [eliminating] the causes… If you have monopoly control over something… you should be asking a question of whether you have to adopt some new requirements.” Davis suggested that “somebody who is above it all should take a look at the USF issue… I am looking for more vision from the FCC.” Whitt said the Commission did “not seem to have a grand vision at the USF program.”

CLECs also should be “closely involved in addressing loop pricing issues,” Southeast Telephone Pres. Darryll Maynard said: “We can spend much time debating how much of the market share ILECs should loose, but the number should be a 70% to 80% loss of market share for RBOCs to CLECs. Clearly, there is a problem with pricing.” He said regardless of whether TELRIC was “too high or too low, it proved to support competition… It’s not necessarily important what TELRIC is, it’s getting competition to a certain market penetration.” Another said: “If ILECs get their way, they will continue to purchase wholesale long distance at TELRIC-like rates, while ILECs force their local service competitors to, through higher local wholesale rates, further subsidize the ILECs’ expansion into other businesses.”

Z-Tel Chief Economist George Ford expressed concern that “the FCC will impose hundreds of millions of dollars on the industry” trying to solve the problem, “rather than acknowledging that the TELRIC price is right.” He said that under the Telecom Act, UNE prices should be based on cost, “but the FCC said they should be equal costs… If UNE prices rise, competition declines, and everyone except of the governor of Illinois knows that… The degree of competition in a state is closely related to the price of network elements.” Ford told the CLECs: “My advice is -- do not be timid about what you propose on prices.”