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Local Access Deregulation: Is "dial tone" really up for grabs?
Kristin McDonald, Telligence

As the next step of telecommunications deregulation takes hold in Denver and within most other major markets, businesses and consumers alike are unclear about what impact the Telecommunications Act of 1996 may have.

Anyone who thought that the break-up of the Bell monopoly and the deregulation of the long distance market was a little chaotic had better hold onto their hats; while those who welcomed and embraced long distance competition may be a little disappointed by the fact that true "ubiquitous" competition is not to be found throughout Colorado in the immediate future.

How is it possible, you may wonder, that both the "bring on the competition" folks and the "if it ain###t broke, don###t fix it" folks will be equally reflective about the continuing changes in the local dial tone market?

The "if it ain###t broke" folks will note that while a mistake in long distance service can be a little irritating; a problem with local access service can be disastrous or even lethal. (Consider for a moment the number of crucial inbound and outbound business calls on any given day, not to mention the ever present possibility of a need for emergency 911 services!)

The "bring on the competition" folks will find that dial tone availability from companies other than U S WEST will not be available state-wide any time soon, that Colorado###s rural populations will be difficult to serve, and that no matter who may have complained in the past about Colorado###s primary ILEC ("incumbent local exchange carrier", a.k.a. U S WEST), providing fairly resilient local services with moderately acceptable order processes and reasonably accurate billing is not that easy!

So what does this legislation that ultimately leads to local dial tone competition really mean? Let###s step through the essential elements of what Congress passed on February 1, 1996, The Telecommunications Act of 1996.

Essential Elements for LECs

The Act makes illegal any and all barriers to entry into the local access market imposed by any state or local government agencies. Local governments must offer nondiscriminatory access to public rights-of-way for all telecommunications service providers.

Within Colorado, the Public Utilities Commission has indeed fully cooperated with all "competitive local exchange carriers " (CLEC###s) and has attempted to enable them to react quickly to changing market and/or network conditions.

Interconnection and Reciprocal Compensation

The law requires ILECs (U S WEST in Colorado) to negotiate reciprocal compensation arrangements for the exchange of local traffic that are determined on the basis of a reasonable approximation of additional costs of terminating such calls. If the ILEC fails to negotiate in good faith, a CLEC may after 135 days initiate a series of state regulatory and Federal Communications Commission actions.

As may or may not be common knowledge, over half of the charges associated with a standard long distance call go back to the LEC (ILEC or CLEC) in the form of origination and termination charges. This compensation agreement simply allows the new local dial tone providers to secure this same revenue stream for traffic on their network, and ensures that the ILEC###s are compensated fairly for traffic which continues to pass over their network

Other Obligations of ILECs

ILECs have the duty to interconnect at any technically feasible point within their networks.

Points of interconnection exist today on the ILEC network within the Denver metropolitan area. More points of interconnection will allow for greater network resource utilization for the ILECs, and the number of interconnections will continue to grow as the CLEC###s gain market share.

ILECs must provide unbundled access to network elements at any technically feasible point.

Unbundling allows the CLECs to re-package and re-sell U S WEST###s services. The true costs for the ILECs to provide such unbundled service to the CLECs are contentious at best.

ILECs must offer wholesale discounts for resale of any service it offers at retail, at rates that reflect the avoidable costs of marketing, billing, etc.

Again, this is a contentious issue as avoidable costs are difficult to quantify. On-going negotiations between the ILECs and CLECs facilitated by the PUC can be expected.

ILECs must provide actual collocation except when showing that it is not practical, in which case provide virtual collocation.

Collocation provides more efficient network utilization and enables better cross network call handling (Cross network meaning calls originating on U S WEST circuit and terminating on a CLEC circuit or vice versa)

Duties imposed on CLECs and ILECs

The legislation imposes the following duties on CLECs as well as ILECs, except an exemption is allowed for all carriers with less than 2% of access lines nationally:

  • Interconnect without causing harm to existing network. Obviously, this is a crucial element for both the ILECs and the CLECs!
  • Not prohibit resale or discriminate in resale. This moves towards "equal access" for the CLECs which can further enable unbundled resale of U S WEST service.
  • Provide number portability as per the FCC requirements, (Whew! This is a sticky one yet to be resolved. Customers can expect to "own" their local numbers and then be able to "port" them in Colorado mid-1998. The issues presented are similar to those which were experienced during toll-free number portability in 1993.) In the sort term, remote call forwarding will be the technique employed to enable businesses to retain their existing phone number and use CLEC services.
  • Provide dialing parity without unreasonable delays,
  • Provide nondiscriminatory access to rights-of-way it owns or controls,
  • Establish reciprocal compensation for the "transport and termination of communications,"
  • Provide equal access and nondiscrimination to IXCs and information service providers,
All of these issues will continue to be under negotiation well into the future between the ILEC, the CLECs and the PUC:
  • IXC (Interexchange Carrier) Entry into Local Service; BOC entry into Long Distance
  • BOCs (Bell Operating Companies) can seek to enter the interstate, interLATA long distance market in the states in which they operate. BOCs may enter the long distance market only when they have satisfied all of the interconnection and entry barrier requirements (the "competitive check list"). This will probably be approximately 36 months out for U S WEST.
  • BOCs and GTE may provide out-of-region interLATA service immediately. In other words, U S WEST may choose to immediately provide interLATA (long distance) services in any area but their own fourteen state region.
  • An IXC serving more than 5% of the nation###s presubscribed lines (i.e., AT&T, MCI, and Sprint) may not jointly market local service obtained from the BOC and long distance service in a state until the BOC is allowed to provide interLATA service in its region or until 36 months from enactment, whichever is earlier. The ILECs### concerns here are that the IXCs will gain a competitive foothold for "one-stop shopping." IXC###s believe that since nearly all customers have or have had ILEC service, they naturally have a much greater "top of mind awareness" factor with consumers.
Conclusion

The local access market will continue to evolve as more and more customers take advantage of the available choices. These expanded choices are most easily accessible to businesses, and the larger an organization the easier it is to secure competitive services.

At my company, we hear from businesses and consumers alike daily who are curious about when local dial tone choices will become available in their business park / neighborhood / apartment / city / county. Quite honestly truly ubiquitous competition throughout Colorado for local dial tone (at either a commercial or residential level) is not foreseeable in the immediate future, but the availability of these services continues to grow both in ter