On December 28, 2015, the FCC finally responded to USTelecom’s (USTA) 2014 petition seeking relief or “forbearance” from several regulatory obligations that apply to incumbent LECs (ILECs). USTA mainly requested forbearance from rules specific to price cap-regulated Regional Bell Operating Companies (RBOCs), but its petition also sought forbearance for regulations imposed on all ILECs, including rate-of-return carriers. The FCC’s December 28 Order grants some of USTA’s requests for forbearance but denies others. This e-lert provides our analysis of this decision.

The FCC granted forbearance from rules that apply to all ILECs, including rate-of-return carriers:

  • Equal Access and Dialing Parity – granted forbearance from the requirement to provide stand-alone long distance service as of December 28, 2015, the effective date of the Order.
    • Existing customers that have separate long distance and local exchange providers are “grandfathered,” which means that these requirements must be maintained for those customers. It would be against slamming rules to change customers’ long distance providers without permission.
    • ILECs are no longer required to provide an option for a separate long distance provider to new customers.
    • ILECs do not have to support separate long distance presubscription if a customer who has a third-party long distance provider wants to change long distance providers after the date of this order.
    • Dialing parity for toll access is no longer required, but ILECs are still required to maintain dialing parity for local exchange calls.
  • Provision of access to newly deployed entrance conduit at regulated rates
    • ILECs were granted forbearance from providing new entrance conduit at regulated rates because the FCC found that all competitors have the same opportunity to establish such facilities.
    • But the FCC denied forbearance from offering conduit at regulated rates for existing conduit entrance because ILECs have standing relationships with building owners that provide an advantage.
  • Access to 64 kbps channel UNE after fiber to the premise is deployed
    • ILECs were granted forbearance from providing 64 kbps after FTTP deployment. The FCC found that CLECs rarely ordered the service and the cost to the ILECs is not justified since the option for resale service is a competitive option. Existing 64 kbps UNE channels are grandfathered and must be maintained.

In sum, some of the price cap RBOCs will be relieved of many of their obligations but the FCC found that they still have market power in key areas. In addition to addressing the USTA forbearance petition, the FCC commented on ETC designations and requirements. The FCC provided rationale on why requiring compliance with ETC requirements is not contingent on receiving high cost USF funding, that compliance does not constitute an unfunded mandate, and that it is justified to treat price cap ILEC ETCs differently than newly designated ETCs.

Analysis
The FCC has provided some significant relief to the RBOCs in this order. However, the FCC continues to support rules that are not symmetrical for all competitors.

Price cap carriers will be on a more level playing field with CLECs and VoIP carriers but did not receive all the relief requested. Most importantly, the FCC denied the price cap carriers’ request for forbearance from providing pole, duct and conduits at just and reasonable rates, providing services in the same quality and provisioning intervals as provided to its affiliates, imputing access to its affiliated long distance provider, providing contract tariff in all locations, and relief from ETC requirements in areas where they do not receive funding. CLECs and VoIP carriers are not subject to these requirements, which may result in lower costs. The price cap carriers did receive relief from some contractual UNE-P obligations, comparably efficient interfaces and Open Network Architecture services subject to Section 214 discontinuance rules, equal access for mass market customers, and pricing of entrance conduit. Relief from these requirements may lower the price cap carriers’ costs.

In the denial of forbearance concerning ETC designation, the FCC treats the RBOCs differently than the rate-of-return carriers. The rate-of-return carriers only have service obligations to customers if it is a “reasonable request.” Financial consideration is one of the factors in determining if the request is reasonable. The price cap RBOCs are not afforded this option. This Order makes clear that they must provide service to census blocks where they retain ETC status even if there is no funding. Price cap carriers can remove their ETC status via the Section 214 process if (1) the census block is determined to be low cost; (2) the census block is served by an unsubsidized competitor offering voice and broadband at speeds of 10/1 Mbps or better to all eligible locations; or (3) the census block is served by a subsidized competitor (another ETC) receiving federal high-cost support to deploy modern networks capable of providing voice and broadband to fixed locations. Rate-of-return carriers do not have the option of rescinding their ETC status, but are afforded the “reasonable request” standard to minimize the financial impact of serving the high-cost areas.

The forbearance on equal access could provide relief to rate-of-return carriers. They will no longer have to offer separate long distance service options, provide third-party validation, or choice of long distance providers to new customers. This opens the door for rate-of-return carriers that typically have a high percentage of toll presubscription to their one long distance service to capture the rest of the market and end the requirement in whole. Note that the FCC forbearance is for federal equal access. Some states may retain intraLATA equal access or include equal access as part of the requirements for local service. Note that now that the price cap carriers have received federal forbearance they will work hard to eliminate any state requirements. Rate-of-return carriers will want to support those efforts so they too can obtain the same relief.

The FCC has a split decision on access to rights of way. They have denied forbearance on providing Section 271 just and reasonable pricing standards to poles ducts and conduits, but have granted forbearance on new building entrance conduit. Affiliated CLECs could be faced with stable pole attachment rates, but much higher rates for conduit entrance facilities. CLECs might need to become proactive on building their own entrance facilities during the construction phases of the building.

If you have any questions on the Forbearance Order or how it will affect your company, please contact Valerie Wimer at 301-459-7590.

Source: JSI e-Lert