CLECs Seek Rate Setting Relief From FCC

Competitive Local Exchange Carriers (CLECs) are still on the mend after the bruising telecom collapse of 2000-2001. As the industry readies for its major trade show and conference next month in Miami Beach, (CompTel/ASCENT Fall 2004 Convention & Expo) many in the CLEC community are looking expectantly for the FCC to clarify rate-setting regulations to introduce stability into their business planning process.

A June 4 decision by the District of Columbia Circuit for the U.S. Court of Appeals clouded the future of the current rate-setting system for CLEC access to portions of incumbents' networks. With the court ordering the FCC to take over the rate-setting process that had been handled by state authorities, CLECs worry that incumbents will emplace higher rates pending rollout of a new system by the FCC. The new rates could go into effect before the end of the year, CLEC sources believe.

"Using history as our guide, we remain concerned that these monopoly providers will wield their considerable market power to squeeze competitors out of business," said H. Russell Frisby Jr, CEO of CompTel/ASCENT, the trade association that represents CLECs. "We are already experiencing the beginnings of a storm surge in which uncertainty is forcing competitors to exit select markets and layoff employees."

Incumbent carriers have a different view. Praising the court's decision, officials at the United States Telecom Association, which represents incumbent local exchange carriers (ILECs), said that prolonging the current rules was undermining competition and thwarting "job creation and investment." They contend that the existing state-by-state rate-setting process was impeding the transition to a "commercial marketplace."

In addition to this industry-wide dispute with ILECs, individual CLECs and incumbent carriers are engaged in legal skirmishes that serve as a microcosm of the larger debate.On Aug. 6, a federal court in Texas granted CLEC Z-Tel Technologies the right to sue SBC Communications and its subsidiaries under federal antitrust law and other statutes. Among a long list of charges, Z-Tel alleged that SBC refused to provide Z-Tel with access to portions of its network and blocked its DSL customers from switching their local phone service to Z-Tel and other competitive carriers.

SBC officials countered that a number of Z-Tel's claims were dismissed by the court. "But [we are] mystified that the remaining claims have been permitted to go forward. Unfortunately, we must continue devoting resources to this baseless case that better could be used to provide service to our customers. Since the court has concluded that complete dismissal of the case would be premature, we will continue with our vigorous defense."