CLECs to Fed: Preserve Network Access

Published February 2, 2004

Executives of telecommunications providers competing with the nation's biggest phone companies met in December with Bush administration officials and FCC commissioners to relay a message: The competitive market Congress envisioned seven years ago is vibrant, and regulators must preserve the rules granting local phone companies access to the Bell public switched network to support innovation and investment.

"We are not looking for a handout," says E.J. Butler, co-COO of PaeTec Communications Inc., who attended the meetings. "We are just looking ... to maintain the spirit of competitiveness that was born out of the Telecommunications Act of 1996."

The CompTel/ASCENT Alliance hosted two days of meetings with federal officials ranging from FCC commissioners to the acting assistant secretary of the National Telecommunications and Information Administration - the principal telecommunications advisor to the White House.

"CEO after CEO talked about how our businesses are ... alive and well and growing and profitable and that this is a marketplace and it's coming back," says Bill Capraro, president and CEO of CIMCO Communications Inc. Capraro says it is increasingly important for the CLEC industry to get in front of regulators to combat rival incumbent providers he contends have elected a "regulatory offense as opposed to a market offense."

"We have been basically forced to be more active from a regulatory perspective to make sure our views are heard," Capraro says.

Bob Hale, chairman of Granite Telecommunications, says executives underscored the importance of preserving UNE-P, the alternative local phone resale platform. Granite is a UNE-P wholesaler serving other service providers in the local phone market by leasing the networks of the four Bell companies. "The CompTel/ASCENT Alliance ... wants the government to continue to foster wholesale services, albeit UNE-P," Hale says.

Robert Mocas, president of Easton Telecom Services, agrees that was the message executives delivered. "We must maintain the ability to have access to customers," he says. "That if they [regulators] want competition to flourish they are going to have to understand that we need access to the RBOC networks on a fair and affordable basis."

The Bells long have insisted they are being required to lease their networks to rivals below their own costs. The FCC has opened a proceeding to modify the pricing formula state regulators use to determine the wholesale phone rates. Meanwhile, state regulators across the country have been directed to make a finding by next summer on whether to preserve the wholesale phone rules CLECs rely on to serve the mass market.

Jerry James, president of Grande Communications, says the CompTel/ASCENT Alliance told the federal officials, according to New Paradigm Resources Group data, the competitive industry has invested $103 billion in capital expenditures from 1996 to 2001. James says a central point echoed during the meetings was to "make sure the [Bush] administration and the commissioners at the FCC are reminded competition is essential to the economy and to the advancement of technology, innovation."

Dale Smith, president and CEO of LecStar Telecom Inc., says he only recently has had time to visit federal regulators and lawmakers: LecStar was founded in 1998. Smith says he was preoccupied those first few years growing sales and trying to get the company into the black. In November, LecStar said it expected to post $16 million in revenue for fiscal year 2003 and positive EBITDA in the fourth quarter. Smith met with FCC commissioners, congressmen and senators from the Southeast in Washington D.C. two months prior to the meetings the CompTel/ASCENT Alliance hosted.

The trade group's meetings were held a month after the CLEC industry accused the Bells of violating antitrust laws by plotting a $40 million lobbying campaign with equipment makers to abolish current regulations. The United States Telecom Association, a trade group representing BellSouth Corp., SBC Communications Inc. and Verizon Communications Inc., says no laws were broken during a November dinner meeting in Washington D.C. - and in an accompanying memo asking the largest equipment makers for up to $500,000 for three years to fund the lobbying campaign.

H. Russell Frisby, CEO of the CompTel/ASCENT Alliance, questions whether the meeting and memo were legitimate. His trade group, among other associations and companies, also has asked New York Attorney General Eliot Spitzer to investigate the claims levied against the Bells. "It would appear they are demanding at least rebates from them in order to prosecute a campaign against us," Frisby says. "What happens if an equipment maker doesn't agree to participate? Does it [mean the] Bells stop buying equipment from that manufacturer."

In November, the House and Senate judiciary committees said they would look into the allegations. The following month, House Judiciary Committee spokesman Jeff Lungren told PHONE+ the committee would not open a formal investigation because Chairman F. James Sensenbrenner (R-Wis.) says "this activity is protected by the First Amendment." Margarita Tapia, a spokeswoman for Senate Judiciary Committee Chairman Orrin Hatch (R-Utah), told PHONE+ the senator, as of December, had not made a decision one way or the other to proceed with a formal investigation.

Frisby says even if Congress does not find the Bells violated any antitrust laws, the meeting was "at least unseemly."