Consumers Hurt by Below-Cost Network Unbundling Practices, Verizon Says

WASHINGTON - Verizon today said that dramatic changes in the telecommunications competitive landscape over the last few years have removed any argument supporting the current rules that require below-cost access to nearly every piece of the existing telecommunications network. In a filing made today, Verizon said those rules are harming consumers by discouraging facilities-based competition, and by slowing the deployment of network facilities, stifling innovation.

"Competition in the telecommunications marketplace has taken hold and is flourishing throughout the country," said Tom Tauke, senior vice president of public policy and external affairs for Verizon.

Tauke pointed to undisputed evidence of competition saying that competitive local exchange companies (CLECs) now serve up to seven million lines in Verizon's region and up to 23 million lines nationwide; cable companies are the largest providers of broadband connections and are aggressively entering the voice telephony market; and, consumers are now routinely communicating through wireless connections and through new services ranging from instant messaging to telephony over the Internet. Indeed, incumbent carriers lose as many lines today to cable telephony providers and wireless carriers as they do to wireline CLECs.

Verizon comments will be filed today in the Federal Communications Commission's (FCC's) triennial review of unbundled network elements (UNEs). In the formal proceeding starting the review the FCC said that changes in technology and in the telecommunications marketplace has made it necessary to re-evaluate the framework for unbundling, and FCC Chairman Powell pointed out that it was time for "prudent course corrections. "

"The Telecommunications Act goal to establish facilities-based competition is being eroded by the very rules that were initially put in place," Tauke said. "Mandatory unbundling of essentially all of the pieces of our network at give-away prices discourages network investment by all players and it undermines the investments that have been made by some facilities-based competitors. Further, consumers are being harmed by these rules because they stifle innovation by all players and make it economically difficult for companies like Verizon to deploy advanced broadband services.

"It is time for the FCC to examine each network element and consider all alternatives in the market," Tauke said.

Verizon's comments point to competitive carriers who currently serve customers using their own switching and transport facilities and provide their own loops to large businesses and multi-tenant buildings. In just the last three years, the number of CLEC switches has nearly doubled and the average number of CLEC fiber networks in the 100 largest metropolitan areas has increased from 10 to 16. The company says this demonstrates that new entrants are not impaired from entering the local telephone market, and Verizon should not be required to unbundle these portions of its network. Nor should it be compelled to unbundle any of its network for providers of broadband services, since there is significant facilities-based competition from cable companies, which are the dominant providers of high-speed Internet access services.

Included with the Verizon filing is a fact report of the current state of competition that details the competitive forces that have emerged in the telecommunications market in the last several years. The report documents that CLECs, including AT&T and WorldCom, have increased their penetration into the local telephone markets at dramatic rates, today serving 30 percent of the nation's business lines.

In addition to the extensive competition from CLECs, the current unbundling policies ignore competition that is flourishing from nontraditional communications technologies, according to the Verizon comments:

• Wireless phones already have displaced some 10 million lines and are predicted to displace 20 million traditional wireline phones in the next three years;

• Cable telephony already is available to 10 million homes; it currently accounts for 1.5 million lines, will increase to 2.4 million by the end of the year and multiply to 10 million in the next four years.

• Cable modem systems dominate mass market broadband with 70 percent of the market and now reach 81 million households.

The fact report also documents that CLECs which use UNE-platforms, use them as an end in themselves, rather than as a stepping stone to facilities-based competition, contrary to the intention of the FCC's unbundling rules. In doing so, the report states, they discourage new investment and devalue the efforts of CLECs that have invested in facilities-based competition.

"The facts clearly show the FCC must remove many UNEs from the current list and allow the remainder to 'sunset' in the next three years," Tauke said. "A sunset date to remove UNEs is necessary if the commission wants to stimulate the continued investment in alternative network choices. In the process, the sunset dates would help create a truly competitive environment in the telecommunications network."

Verizon Communications

Verizon Communications (NYSE:VZ) is one of the world's leading providers of communications services. Verizon companies are the largest providers of wireline and wireless communications in the United States, with 132.1 million access line equivalents and 29.4 million wireless customers. Verizon is also the largest directory publisher in the world. With more than $67 billion in annual revenues and approximately 247,000 employees, Verizon's global presence extends to more than 40 countries in the Americas, Europe, Asia and the Pacific. For more information on Verizon, visit www.verizon.com.

Related Documents:

Fact Sheet:: The numbers tell the story about competition

What the experts say must be done

Limiting UNEs will spur real competition