TELECOM AGENT NEWS #41

Eureka, CA, December 17, 2004 (TheDigest.Com) - Call this an editorial, a vision or a dose of hard reality, but here is my take on this week's regulatory trainwreck provided courtesy of the Federal Communications Commission. Well, we all knew it was coming, but this week's decision by the Federal Communications Commission to dismantle local telephone competition still is leaving many of us shaking our heads. After years of attempting to promote local competition in the telephone market, the FCC has basically signed its death warrant. UNE-P is dead. The Regional Bells have won. Within the next 12-18 months local resale providers and CLECs will either be forced to transition to the expensive UNE-L platform, or shut down. UNE-L forces competitive providers to install their own switches at every single Central Office at which they wish to offer service. Right now, most UNE-P providers offer service on nearly a nationwide basis. In the future, each of these providers will have to spend potentially millions of dollars just to serve a single city. There is no question that never again will local competition reach the level of availability that UNE-P offers now. Quite simply, most consumers in the U.S. will once again have no choice as to who to pick as their local phone company. Some providers such as Z-Tel have announced plans to install their own UNE-L equipment in extremely limited areas of the country, which will shrink the availability of their service to far less than 1% of the geographic area they now serve. Others, such as MCI, have decided to outsource their UNE-L connectivity to CLECs that already have networks in place. Availability will basically be limited to the largest metropolitan areas of the country. So, big city consumers may have choices, but under the new FCC rules those who live in the vast majority of the country will simply have no choice of local providers. While many UNE-P providers are trying to paint a happy face on this disastrous situation by announcing plans to migrate to UNE-L, there's a dirty little secret that these companies are failing to pass on to consumers and investors. UNE-L is doomed as well, and here's why... As most of you know, SBC and Verizon have both begun plans to deliver service to their customers via fiber. Millions of copper lines will eventually be replaced with fiber, which will deliver not only standard dialtone, but high-speed internet, cable television and other services that haven't even been invented yet. The Bells need to deliver fiber directly to each customer in order to compete head-on against the cable companies, which have begun cutting a huge swath into the RBOCs marketshare by offering bundled television, broadband access and now telephone service that consumers are gobbling up as fast as they can sell it. There is little doubt that unless the Bells can compete effectively against the cable companies, they will go the way of the dinosaur. So, what does this have to do with UNE-L? Everything. Look closely at all of the services that the RBOCs are planning on providing, and the technology that they are planning on using. Nowhere will you see any mention of copper wires. Quite soon, if it is not already the case, incumbents will stop installing new copper lines entirely. Why should they, when they are already spending billions to replace existing copper wires with fiberoptics? You certainly don't see most cable companies putting new copper lines in place, and there is no reason to believe that the Bells will either. UNE-L providers are largely dependent upon incumbents to lease them copper wires to connect them with potential customers. However, if no new copper lines are deployed, this brings the viability of UNE-L as an expanding service to a dead halt. Incumbents will NOT be forced to lease their new fiber lines to UNE-L providers. Just their old copper lines. For that matter, there is every likleyhood that incumbents will eventually begin to dismantle their existing copper networks, once they have their new fiber networks in place. There is currently no protection in place for UNE-L providers, should incumbents decide to simply scrap their obsolete copper lines. Let's face it, there is little reason for the Bells to maintain a completely redundant network based upon antiquated technology. It only makes sense that the old copper wires will eventually be ripped up and done away with forever. The final nail in the coffin for UNE-L is the fact that the very idea of basing your entire business plan upon 100 year old technology, which has absolutely no chance of long-term survival in today's (and tomorrow's) bandwidth-hungry society, is a recipe for disaster. At least with UNE-P there was minimal cost to get started as a competitive provider. Who in their right mind would spend millions of dollars on switching equipment for a technology (copper wires) that is already seen as obsolete by the largest players in the industry? While UNE-L may provide competitive providers with a few years worth of viability, its long-term survival is already etched in stone. It is ultimately a dead end road that is only viable if technology suddenly decides to take a giant leap backwards in time. Just as surely as the horse and buggy was doomed to be replaced by the automobile, copper is doomed to be replaced by fiber. Any company that places its bets on the future of copper might as well be investing in steamboats, buggy whips or rotary telephones. The RBOCs will soon be able to deliver a plethora of high-speed, whiz-bang features that UNE-L providers will quite simply sever be able to offer. Just as most broadband users would never think of going back to a dial-up modem, most consumers in fiber-ready areas will never again consider going back to analog phone service. Prices will be lower, quality will be better and UNE-L's will quite simply not be able to compete against their high-tech counterparts. While I hate to be a downer, there quite simply is no good news for competitors or consumers alike in this week's FCC decision. The future of any provider who chooses to sink their money into UNE-L has to be seriously questioned, in my opinion. Copper is quite simply not the future of telecom. On a more positive note, a new technology called Wi-Max may finally cure the "last mile" problem for CLECs, at least those who survive. This amazing new wireless technology promises to revolutionize the delivery of telecommunications services. Forget Wi-Fi "hot spots" that offer a service that carries a few hundred feet. Wi-Max can deliver a strong wireless signal for up to 30 miles, with plenty of bandwidth for high-speed internet, telephone service and possibly even video as well. It will probably be at least two years before Wi-Max becomes a household name, but right now it is the best bet for the CLEC industry. Let's hope that enough of them survive to take advantage of it.

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Originally submitted by William Van Hefner, editor-in-chief of TheDigest.com