FCC Order Grants ILEC Wishes: Scaled Back Network Unbundling Rules and Avoided-Cost Resale Requirement to be Phased-Out

The Telecommunications Act of 1996 (“The Act of 1996”) moved to break up telecom monopolies by requiring local exchange carriers to allow their rivals use of individual (or “unbundled”) network components to reach customers. In the twenty-four years since then, the Federal Communications Commission (FCC) has repeatedly scaled back the unbundling requirements where telecom competition has (arguably) grown robust enough to stand on its own feet. Citing the transformation of the American communications into “a marketplace characterized by competition and technological innovation”, the FCC announced plans to continue reducing unbundling requirements for certain broadband services, while preserving them in narrow areas where necessary to encourage competition.

The proposed changes are organized based on specific network technologies and geographic areas. The Report and Order eliminates unbundling requirements, subject to reasonable transition periods, for low and high-speed business broadband-capable loops in high-density, high competition markets. The FCC will eliminate unbundling requirements for voice-grade narrowband loops, operation support systems, and network interface devices nationwide. Furthermore, unbundling will no longer be required for dark fiber transport capacity within a half-mile of competitive fiber networks, though this change will not go into effect for existing dark fiber circuits until 2028.

The Rule and Order also announces forbearance on the Avoided-Cost Resale obligation, subject to a three-year transition. This rule requires that incumbent local exchange carriers (ILECs) “offer for resale at wholesale rates any telecommunications service that the carrier provides at retail to subscribers who are not telecommunications carriers” and is mainly used by competitive local exchange carriers (CLECs) to maintain certain legacy voice services. The FCC is permitted to forbear from established regulations where such forbearance is 1) not necessary to ensure fair regulatory conditions, 2) not necessary for the protection of customers, 3) consistent with the public interest, and 4) likely to promote competitive markets.

Despite reducing unbundling obligations nationwide, the FCC recognizes that the unbundling obligations of the Act of 1996 “have continued benefits in providing competitive telecommunications services and broadband access in rural areas, where competitive entry is harder” for CLECs and broadband providers. Therefore the unbundling rules will remain in place for low and high speed broad-band capable loops in these areas. The lack of viable competition and high-quality broadband for rural and low-population regions has been a persistent problem for telecommunications regulators. By preserving pro-competitive support for these areas, the FCC signals that it is still focused on and actively addressing the shortcomings of rural internet.

The proposed Rule and Order is scheduled to be considered at the October 27 Open Meeting.  Thus, any proposed changes must be submitted in the record by no later than October 20.  If you would like to know more about the current state of FCC broadband regulation, and how unbundling of business communication networks could affect your company, please contact Jonathan S. Marashlian at jsm@commlawgroup.com or 703-714-1313.

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