<..could soon land either back in a line position in ART..>
interesting thought, though i'd be surprised.
been heavily occupied elsewhere since last week, so didn't get to post
all the research comments on last week's FCC CLEC ruling. here's
jack's as a representative of the issues (i saw about 10 of them), for
the thread:
FCC Rules As Expected
Analyst: Jack B. Grubman
Salomon Smith Barney
Wednesday, September 15, 1999
Release Date: 09/15/99
SB Industry: Telecommunications Services
Sector: Media/Telecom
Associated Ticker(s): AIT, BEL, BLS, SBC, USW, GTE, ALGX, ICGX, ICIX,
MCLD, NXLK, RCNC, TGNT, WCII, HYPT, FCOM, CLEC, RTHM
--SUMMARY:----Telecommunications Services
*We view today's FCC decision as basically a non-event since the decision
was "as expected". *The decision states that the Bells will not be forced
to resell DSL lines at a discount which is a positive for RTHM and other
facilities-based DSL providers including traditional clecs such as ALGX,
FCOM, HYPT, NXLK, MCLD, ICGX, & ICIX. FYI, the Bells continue to be
required to condition loops for DSL providers. *In addition, Bells have to
resell at a discount most of the network elements but not switches if there
is enough competitors' switches available and not directory and operator
services. *Since transport continues to be required for discounted resale,
the ruling could be perceived as slightly negative for the Bells and
slightly positive for the CLECs. *Bells must continue to meet section 271
of the Telecom Act of 1996 standards for entry into long distance.
--OPINION:------------------------------------------------------------------
The FCC today rendered its decision regarding leasing of network elements
which came in as expected and in-line with what we detailed in our 24
page report on February 12, 1999 titled, "Supreme Court Upholds FCC
Jurisdiction on Telecom Act". This decision is in-line with what the
ALTs (Alternative Local Telecom providers) organization was looking for.
ALTs is a pro-competition organization made up generally of CLECs with
Royce Holland from Allegiance Telecom as chairman. We believe the FCC
continues to be logical and consistent with the spirit of the Telecom Act
of 1996 in its rulings. In fact, the FCC is only letting the Bells "off
the hook" in terms providing access to services to CLECs when there is
enough competition in the marketplace to dictate this action.
In summary as we detail later in this note, the Bells will continue to be
forced to resell at a discount 6 out of the 7 network elements (loops,
network interface devices, local circuit switching (except for larger
customers in major urban markets), dedicated and shared transport,
signaling and call-related databases and operations support systems) but
not directory and operator services. Specifically on the switching
requirements, the FCC concluded in light of competitive deployment of
switches in the major urban areas, that, the Bells do not have to provide
access to unbundled local circuit switching for customers with four or
more lines that are located in the densest parts of the top 50
Metropolitan Statistical Areas (MSAs). In terms of directory and o
perator services this service is highly competitive with many available
option for CLECs.
We believe that transport in major urban markets was also a question mark
in some minds and since transport was not granted an exception for
discounted resale in highly competitive areas, this ruling could be
perceived as slightly negative for the Bells and slightly positive for
the CLECs.
In addition, there are some new elements the FCC now requires which were
not on the original list of 7. Specifically, the Bells must provide
unbundled access to subloops, or portions of loops, and dark fiber optic
loops and transport. Both new elements expand the CLEC addressable
market under partial facilities-based or hybrid service offerings.
Furthermore, the decision states that the Bells will not be forced to
resell DSL lines or packet switches at a discount which is positive for
facilties-based providers. This part of the ruling makes sense since the
FCC wants to continue to promote the buildout by competitors of DSLAM
equipment and packet-switching technology as the rapid deployment of
these services will benefit end-users. The Bells continue to be required
to condition loops for DSL providers. This is a positive for RTHM and
other facilities-based DSL providers including traditional clecs such as
ALGX, FCOM, HYPT, NXLK, ICGX, ICIX, and MCLD since new competitors must
also be facilities-based. As such, we believe this ruling raises the
value of the DSL networks.
For the Bells this decision should be viewed as neutral to slightly
negative. Bells which are aggressively trying to enter long distance
(which is really all the Bell companies but we believe that in particular
Bell Atlantic in NY and SBC in Texas are getting close) will continue to
have to provide all 7 network elements at wholesale or discounted rates
under the Telecom Act since the Bells must continue to meet section 271
standards for entry into long distance.
For the CLECs, this decision is a positive because it reaffirms the fact
that they will continue to have access to Bell network elements. In
addition, all the CLECs we follow own their own switches so therefore
access to switching elements is irrelevant to them. Most if not all of
the CLECs we follow outsource directory assistance and operator services
to other smaller providers and bid out this service generally away from
the Bells anyway. For pure-play DSL carriers such as Rhythms
Netconnections, we view this decision is a huge positive as it increases
the barrier to entry for competitors interested in providing DSL.
SUMMARY OF REQUIRED ELEMENTS
The FCC's reaffirmed that the incumbent LECs must provide access to 6 of
the original 7 network elements that were required by the original order
in 1996:
1) LOOPS. ILECs must offer unbundled access to loops including
high-capacity lines, xDSL-capable loops, dark fiber, and inside wire
owned by the ILEC. ILECs must also provide unbundled access to subloops
or portions of the loop at any accessible point.
2) NETWORK INTERFACE DEVICES (NIDs). ILECs must offer unbundled access
to NIDs throughout their service territory. The NID is a device used to
connect loop facilities to inside wiring.
3) LOCAL CIRCUIT SWITCHING. ILECs must offer unbundled access to local
circuit switching except for switching used to serve end users with four
or more lines in the densest areas in the top 50 MSAs.
4) DEDICATED AND SHARED TRANSPORT. ILECs must unbundle dedicated
interoffice transmission facilities, or transport, including dark fiber.
ILECs must also unbundle shared transport (or interoffice transmission
facilities that are shared by more than one carrier, including the
incumbent) where unbundled local switching is provided.
5) SIGNALING AND CALL-RELATED DATABASES. ILECs must unbundle signaling
links and signaling transfer points in conjunction with unbundled
switching and on a stand-alone basis. ILECs must also offer unbundled
access to call-related data bases including Line Information database,
Toll Free Calling data base, Number Portability database, Operator
Services/Directory Assistance databases, Advanced Intelligent Network
databases and the AIN platform and architecture.
6) OPERATIONS SUPPORT SYSTEMS (OSS). ILECs must unbundle OSS throughout
their service territory. OSS consists of pre-ordering, ordering,
provisioning, maintenance and repair, and billing functions supported by
an ILECs databases and information. The OSS element includes access to
all loop qualification information contained in any of the ILEC's
databases or other records needed for the provision of advanced services.
The FCC declined to require the ILECs to unbundle facilities to provide
high speed Internet access and other data services including DSLAMs. In
addition, the Commission required the ILECs to provide unbundled access
to subloops, or portions of loops, and dark fiber optic loops and
transport which were not on the original list of unbundled network
elements. The Commission expects to re-examine the national list of
unbundled network elements in 3 years. State commissions may require
ILECs to unbundle additional elements as long as the obligations are
consistent with the requirements of section 251 and the national policy
framework of this Order. Furthermore, ILECs are required to provide
access to combinations of loop, multiplexing/concentrating equipment and
dedicated transport if they are currently combined.
NET/NET: The FCC continues to rule in favor of local competition and
logically in terms of the rules of the game. We continue to believe that
the FCC will continue to act with the consumers best interest at heart
which includes providing rules which encourage the deployment of CLEC
facilities since competition lowers prices and enables enhanced
services. As such, we reiterate our Buy ratings on the CLECs we follow,
Allegiance Telecom, Focal Communications, Hyperion, ICG, Intermedia
Communications, McLeodUSA, NEXTLINK, RCN, Teligent, US LEC, WinStar and
Rhythms. We view today's ruling as generally in-line with expectations.
-------
also, there were about a dozen reports out this week on GSTX and ICGX,
i don't own, but if anyone has interest - email me at rencap@home.com. |
