Before the

FEDERAL COMMUNICATIONS COMMISSION

Washington, D.C. 20554

In the Matter of                                                             )

Inquiry Concerning the Deployment of              )

Advanced Telecommunications Services               )            CC Docket No. 98-146

Capability to All Americans in a Reasonable                        )

and Timely Fashion, and Possible Steps              )

to Accelerate Such Deployment                              )

Pursuant to Section 706 of the                                )

Telecommunications Act of 1996                            )

 

Barbara A. Dooley
President
Commercial Internet eXchange Association

Seventh Floor
1200 Nineteenth Street, N.W.
Washington, D.C.  20036
202-861-3900
March 20, 2000

COMMENTS OF THE

COMMERCIAL INTERNET EXCHANGE ASSOCIATION

Introduction And Summary

            The Commercial Internet eXchange Association ("CIX"), by its attorneys, files these comments on the Second Notice of Inquiry into the deployment of advanced telecommunications capability (Second NOI) pursuant to Section 706 of the 1996 Telecommunications Act (1996 Act).  CIX is a trade association that represents over 150 Internet Service Providers (ISPs) who handle over 75% of the United States' Internet traffic.[1]

            Internet service providers, including CIX members, promote the availability of efficient, innovative and market-based Internet services to the public.  The Internet has grown at an astounding rate since the Commission published the First Report,[2] and has evolved into a dynamic and important part of the American economic engine.  CIX urges the Commission to continue to implement Section 706 in a careful, thoughtful manner, guided by Congress’s clear support for competition in the local telecommunications market and the Commission’s policy of “unregulation of the Internet.”[3]

            CIX encourages the Commission to continue to pursue the goals embodied in Section 706 by fostering competition and relying on market-based, rather than regulatory, incentives to invest in leading-edge network capacity and functionality, because such actions bolster the strength and growth of the Internet.

            CIX also believes, however, that until a truly competitive local market exists, Sections 706, 251, and 271 identify the Commission’s paramount objective: opening the incumbent local exchange carrier’s (“ILEC’s”) networks to competition to enable advanced services, service providers, and the Internet to flourish.  Only when ILECs have in fact met their obligations under the 1996 Act, by truly opening their local markets to competition, can the Commission step away and rely on the competitive market rather than pro-competitive regulations.

            CIX also believes that, so long as ISPs and end-users lack real alternatives to the ILEC local network, the Commission should ensure that ILECs do not use their market position to narrow consumer ISP choice.  Specifically, consumers should not be steered or forced to accept service from ILEC-affiliated ISPs in order to access the ILEC’s advanced services.  So long as consumers lack alternatives to the ILEC local facility, the Commission must prevent ILECs from discriminating in favor of their affiliated ISPs, especially with respect to access to telecommunications services, customer proprietary network information (CPNI), or by any other means by which ILECs can restrict competitive access and use of the public switched telecommunications network (PSTN).

Discussion

I.          The Meaning Of "Advanced Telecommunications Capability"

            The Second NOI invites comment on the definition of “advanced telecommunications capability” adopted in the First Report, which identified advanced telecommunications capability as “the capability of supporting, in both . . . directions, a speed [bandwidth] in excess of 200 kilobits per second (kbps) in the last mile.”[4]  The Commission asks if this definition should be modified and, if so, how.  The Commission also seeks comment identifying and discussing various relevant factors, including the importance of symmetrical bandwidth and terminology.

In its response to the First NOI, CIX noted that advanced telecommunications capability is a relative standard, evolving over time and modified by context.[5]  CIX recommended that, to ensure technological neutrality, the Commission should explore regulatory options that encourage a multiplicity of different transmission media including satellite, wireless, cable, as well as PSTN-based telecommunications offerings.  CIX also stated that “advanced” networks are those that are capable of supporting a range of service offerings from multiple providers, regardless of specific transmission technology.

CIX reiterates these positions, and adds that telecommunications capability can be advanced, yet not broadband.  For Instance, in the year since the First Report, the concept of advanced telecommunications capability has grown to include “narrowband” applications that provide increased functionality and Internet access.  Specifically, wireless carriers are making Internet services available through digital cellular and PCS telephones, and personal digital assistants, such as the Palm Pilot are also beginning to offer Internet access and E-mail functionality.  These technologies do not conform with a “broadband only” advanced telecommunications capability paradigm, but certainly offer advanced telecommunications capabilities, in terms of cost, convenience, and functionality.  Moreover, the concept of advanced telecommunications capability could include “56K” V.90 transmission capability, but should not include V.34 transmission capability or legacy POTS.[6]

Thus, CIX recommends that the Commission should view advanced telecommunications capability as a “moving target,” encompassing a growing range of products and services offering levels of accessibility, capability, cost efficiency, and functionality superior to those offered by legacy telecommunications services.  The Commission should use this modified advanced telecommunications capability definition as a tool for identifying the remaining artificial and regulatory bottlenecks that continue to hamper market-driven distribution of advanced telecommunications capability to all Americans. 

II.        ATC is Being Deployed to All Americans.

In the Second NOI, the Commission asks for information on the deployment of both backbone and last mile facilities.[7]  The Commission requests information on potential customer access to deployed facilities used for providing ATC, as well as actual consumer sales of advanced telecommunications products.[8]  In addition, the Commission requests input on appropriate methodology for depicting and analyzing advanced telecommunications capability deployment.[9]

A.        Backbone Deployment

The explosive growth rate of E-commerce, advances in Internet backbone capability, and the dramatic increase in Internet usage by virtually all sectors of the American populace demonstrate the rapid and significant advances being made throughout the telecommunications industry.  The volume of traffic on the Internet is doubling every 100 days, several orders of magnitude over the traditional telephone traffic growth rate of 5 percent per year.[10]

With respect to wireline backbone and last mile facilities serving large and medium-sized businesses, CIX agrees that the Commission’s conclusions in the First Report remain valid and that broadband backbone facilities continue to be deployed in a reasonable and timely manner. There are 43 backbone providers in the United States, including many new entrants.  Their carriers are investing heavily and deploying broadband backbone nationwide.  For example, CIX’s founder PSINet, delivers capacity on demand for more than 230 points-of presence (POPs) throughout the country.  There are 18 other broadband providers that have at least 200 POPs.  Optical fiber is being deployed, worldwide, at a rate of 3000 feet per second, or 2000 miles per hour.[11]  Moreover, these same backbone facilities support narrowband mobile and fixed wireless internet services, which CIX believes should be classified at ATC.  Thus, CIX believes that, in terms of backbone capacity and broadband facilities deployed in central offices, advanced telecommunications capability is being deployed to large and medium-sized businesses in a reasonable and timely manner.  In addition, because large portions of the small business and residential markets are within the reach of these central offices, and the rapid rate at which broadband facilities are being deployed to the yet-unserved central offices, CIX believes that the backbone facilities supporting advanced telecommunications capability are, or will soon be, available to all Americans.

B.         Broadband Capability Deployment

In most major markets xDSL facilities are deployed in central offices.  Specifically, xDSL equipment has been deployed in approximately 7,000 of the 22,000 central offices in the United States, including in the 600 to 700 central offices that generate the most business.[12]  The number of xDSL-equipped central offices has almost doubled since August of 1999.[13]  Moreover, ISPs and competitive local exchange carriers (CLECs) are also executing plans to deploy xDSL functionality in central offices serving secondary markets and rural areas.[14]

Despite the ILEC’s claim in the Section 706 Petition that they (the ILECs) are the only carriers capable of deploying xDSL service, CLECs actually lead the way on xDSL deployment.  ILECs have deployed xDSL equipment in 2,042 central offices, while CLECs had deployed xDSL equipment in 4,475 central offices, twice as many central offices as ILECs have deployed in to date.[15]  ILECs also have widespread plans for xDSL deployment.  SBC Communications Inc. (SBC), for example,  has announced plans to invest six billion dollars over a four-year period to provide xDSL service to 10 million customers almost immediately, and 50 million customers by the end of its four-year plan.  Bell Atlantic is also accelerating its xDSL rollout to deploy advanced services to 21 million customers in the next few months.[16]

C.        Last Mile Deployment

There is no lack of advanced telecommunications capability access over the last mile facilities serving large and medium-sized businesses.  Businesses in these sectors have long enjoyed superior access to advanced and broadband facilities, in the form of private lines, special access services, and cooperative agreements.

Likewise, CIX believes that the competitive forces driving the deployment rate of broadband advanced telecommunications capability to central offices serving small business and residential consumers can assure the availability of advanced telecommunications capability to all Americans.  Moreover, it appears that advances are being made in last mile advanced telecommunications capability deployment in the form of wireless, wireline, cable, and potentially satellite technologies.[17]  Each of these technologies are uniquely adept at providing advanced telecommunications capability in particular geographic situations.  Thus, as a group, they offer a variety of means that should leave no part of the population unserved by some form of ATC.

Broadband service, via xDSL and Cable modem, is capable of reaching a large portion of the American populace.  There are already over 500,000 xDSL lines in service, [18]  two-thirds of which serve the residential market.  Current projections indicate that by 2002, there will be close to 8 million such xDSL lines in the United States.[19]  Furthermore, the Commission’s new line sharing rules will do much to bring broadband and advanced telecommunications capability to the large segment of the population that do not have unused copper pairs in their inside wiring and local distribution plant, such as pre-war, urban housing, rural communities.

Access to wireless advanced telecommunications capability is also increasing rapidly, and prices for such access are already dropping.  For instance, AT&T has recently announced that it will provide wireless data retrieval at a flat rate for users of its mobile phone service in over 3000 cities.[20]

For these reasons stated above, CIX believes that the Commission should find that advanced telecommunications capability is being deployed to all Americans, and that the quality and variety of Internet offerings continues to progress at a significant pace.  CIX does not believe that the Commission should interfere with the dynamic relationship between Internet providers; but should maintain its policy of “unregulating” the Internet

III.       ISPs and CLECs are Attempting to Deploy Advanced Telecommunications Capability in a Reasonable and Timely Manner.

CIX’s maintains that the Commission’s primary goal should be to support a competitive telecommunications market that encourages private investment and fosters the development of new technologies.  CIX believes that the Commission could encourage more rapid deployment of advanced telecommunications capability by forcing the ILECs to open their local monopolies, fostering local competition and consumer choice.  The Commission should continue to reduce the regulatory delay[21] and transaction costs required to introduce new network technologies and continue to encourage interoperability, standardization, and open protocols and networks.

A.        Unbridled ILEC Control Over the Local Loop is the Most Significant Barrier to Advanced Telecommunications Capability Deployment to All Americans.

Section 706 inquires into the reasonability and timely deployment of advanced telecommunications capability to “all Americans.”  As discussed above, there is no shortage of backbone facilities and other means of providing access to consumers.  Yet many Americans experience substantial problems obtaining last mile access to the broadband services that they desire, especially when they are attempting to obtain access to CLEC-provided Advanced Telecommunications Capability.[22]  ILECs control virtually all of the country's local telecommunications facilities.  Access through those facilities to advanced telecommunications capability deployed in central offices appears to be the sole remaining bottleneck to broadband deployment over the PSTN.  As we discuss below, CLECs and ISPs are fully engaged in an effort to provide xDSL service to through local facilities to small business and residential consumers, but their efforts are frustrated by the ILECs’ failure to cooperate and comply with the 1996 Act and the Commission’s local competition rules.  Thus, the Commission’s first order of business must be to strengthen and enforce the network unbundling rules to ensure that CLECs can access the ILEC’s local facilities. 

A forthcoming survey of small and mid-sized ISPs reflects the following market conditions:[23]

·        Small ISPs are receiving substandard services from ILECs.  Most of these ISPs claim that loop problems happen frequently or continually and that trying to have orders fulfilled takes months, and repairs take days.  Problems such as there are found consistently among ILECs, and damage the reputations of small ISPs, costing them customers, revenues, and the opportunity to grow.

·        Small ISPs often encounter lost orders for ILEC service, customer “slamming” by the ILEC’s ISP, ILEC customer service and repair technicians that attempt to “sell” ILEC ISP service at every opportunity, even by telling customers that problems would not occur if they switched to the ILEC’s ISP.

·        ISPs would prefer to deal with CLECs, from whom they can obtain better service, but the CLECs must confront the same ILEC service problems and anti-competitive behavior.  In addition, CLECs cannot yet reach all areas of the country.

The Commission should focus on promoting competitive access to xDSL functionality, through loop and subloop unbundling pursuant to the Local Competition Third Report and Order,[24] and line sharing access, pursuant the Advanced Services Third Report and Order.[25]  Moreover, the Commission should focus on promoting competitive broadband deployment capability though the ILEC digital loop carrier systems (DLCs) that currently frustrate CLEC xDSL deployment.[26]  This can be accomplished by clarifying the Commission’s subloop unbundling rules to the same extent that the Commission clarified its line sharing rules in the Advanced Services Third Report and Order.[27]  Moreover, the Commission should find that artificial bottlenecks that result from an ILEC’s failure to deploy its local facilities in a manner that facilitates competition and access to advanced telecommunications capability are presumptively unreasonable.  The Commission should consider establishing a regulatory mechanism to compel ILECs to maintain their local facilities in a manner that promotes competitive access and competition.

The Commission has recognized that copper loop facilities under 18,000 feet should be able to carry xDSL transmissions.  Where they cannot, it is likely because the ILEC has chosen to deploy unnecessary legacy voice service equipment, such as loading coils, or is otherwise maintaining an inefficient network that hinders the deployment of advanced services.[28]  The Commission should vigorously enforce its loop and network element unbundling and line sharing rules[29] to ensure that ILECs cannot continue to use their control over local bottleneck facilities to thwart residential and small business access to advanced telecommunications capability provided by the ILEC’s competitors.  Furthermore, the Commission should continue to examine the practical effects of its network element unbundling rules to determine if additional or more precise regulation will be necessary to compel the ILECs to finally stop trying to leverage their voice monopoly into the competitive advanced telecommunications capability market.  Because CLECs are generally much more actively seeking to deploy advanced services, the ILEC’s stubborn resistance to the Commission’s network unbundling requirements is the primary bottleneck hindering the deployment of broadband advanced telecommunications capability on loops under 18,000 feet.

Copper loops between 18,000 feet and 3.5 miles, and DLC facilities may not yet be practically capable of caring xDSL from competing suppliers, but can at least carry 56 kbps V.90 transmissions, if the local network facilities are efficiently deployed.[30]  The Commission should find that local loops in this range that cannot support V.90 transmission are presumptively artificial bottlenecks that prevent advanced telecommunications capability access.  The FCC should impose regulatory pressure on ILECs to modify these longer local loops wherever technically feasible to facilitate at least this minimum standard necessary for unimpaired consumer Internet usage.

Despite the clear mandates of the Act and the Commission’s rules that the ILECs provision DSL-conditioned lines to both their competitors and their affiliates on a non-discriminatory basis, ISPs attempting to provide xDSL service to their customers often experience extraordinarily slow DSL loop provisioning, resulting in an inability to serve end-users.

For instance, SBC is embarking on a full-force effort to deploy advanced telecommunications capability in its region, but at the same time, is failing to cooperate with CLECs attempting to do the same, chilling competition.[31]  The Department of Justice has concluded that neither SBC in its Texas 271 application, nor Bell Atlantic in its New York 271 application, had demonstrated an acceptable level of performance, or that CLECs have access to the xDSL loops necessary for them to compete effectively in those regions.[32]  In addition, evidence indicated that Bell Atlantic provisioned functioning loops in a discriminatory fashion, thereby causing competitors to lose a substantial number of customers.[33]  Moreover, in Utah, US West precluded competitive providers from obtaining xDSL-conditioned lines until well after US West began marketing and rolling out its own xDSL Internet services.  Even then, provisioning was extremely slow.  The Public Service Commission of Utah is currently monitoring US West’s provision of DSL-conditioned lines.[34] 

B.         ILECs are Unlawfully Bundling Advanced Telecommunications Capability with Other Products and Services, Creating an Opportunity for Anti-Competitive Behavior.

ILECs are also bundling their DSL Internet offerings in a manner that makes it impossible for independent ISPs to compete and raises significant concerns of cross-subsidization and vertical integration of services in contradiction to the Commission’s existing rules.  These practices take several forms, including:  (1) bundling and marketing ISP service and DSL service as a single product to consumers; (2) the provision of free or discounted modems and installation services for consumers purchasing bundled ISP DSL service ; and (3) discounts on bundled ISP/xDSL service for existing voice telephone service customers.  In addition, ILECs can offer the bundled packages at artificially low-prices, due to their ability to engage in cross-subsidization.

ILECs flagrantly engage in this behavior,[35] despite the fact that the Commission “has restricted bundling of CPE and enhanced services with telecommunications services out of a concern that carriers could use such bundling in anti-competitive ways.”[36]  The Commission’s anti-bundling restrictions “not only prevent carriers from offering distinct goods and/or services only on a bundled basis, but also prohibit carriers from offering ‘package discounts,’ which enable ‘customers [to] purchase an array of products in a package at a lower price than the individual products could be purchased separately.’”[37]  Moreover, a number of residential consumers in more remote areas and areas that lack competitive xDSL choice rely on ISDN to gain higher-speed Internet access.  At least one ILEC has begun to squeeze out its ISP competition by refusing to provision residential ISDN, offering instead residential xDSL access packaged with the ILEC’s ISP service.[38]  Practices such as these frustrate the reasonable and timely deployment of advanced telecommunications capability to all Americans by throwing up barriers to market entry and robbing consumers of competitive choice.

IV.            Recommendations for Commission Actions to Support Deployment of Advanced Telecommunications Capability

CIX urges the Commission to focus on the role or regulation in the telecommunications market, rather than appropriate Section 706 as a vehicle for regulatory entry into the Internet services markets.  In addition, the Commission’s attention should be focused on ensuring that all Americans may not only attain access to ATC, but that Americans should not have to give up their existing freedom of ISP choice associated with such access.

Despite the Commission’s concerted efforts to implement the 1996 Act, significant wireline competition in the local market is not yet securely established, largely because the ILECs have bent over backwards to maintain their monopoly business model.[39]  In the preceding discussion, CIX has identified the two, per se unreasonable barriers to timely advanced telecommunications capability deployment: the ILEC’s lack of cooperation and compliance with the Commission’s local competition rules and unlawful bundling activities.  Thus the Commission’s priority for both Section 706 goals and the local competition provisions must remain focused on bringing the ILECs into full regulatory compliance with the Commission’s network element unbundling and local competition rules.

A.        ILECS must not be Permitted to Subvert Section 706 for to Avoid their Unbundling Obligations

CIX reiterates its statement in the First NOI proceeding that Section 706(a) does not constitute an independent grant of forbearance authority or of authority to employ other regulatory methods.  The ILECs will undoubtedly attempt to use this proceeding as an opportunity to subvert Congress’s and the Commission’s efforts to establish competition and promote advanced telecommunications capability deployment by arguing that only ILECs are capable of providing service to all Americans.  The ILEC’s continued efforts to employ Section 706 as a means of avoiding the pro-competitive provisions of the Act must not be permitted to succeed.  Providing premature interLATA relief would fatally compromise the Act’s best source of influence over RBOC anti-competitive activity, by giving the RBOC’s the ability to provide long distance service while pursuing anti-competitive tactics to defend their local monopolies.

In addition, most ILEC xDSL roll-outs are merely responses to the threat of competitive providers.[40]  The Commission must continue to support Congress’s pro-competitive intention for the 1996 Act and must not accede to ILEC arguments for extending their voice monopoly, monopostic product bundling, and other anti-competitive behavior masquerading as the promotion of new service deployment.  The Commission should not fall for self-serving ILEC arguments that they will deploy advanced telecommunications capability if they are released from pro-competitive requirements.  There has never been a barrier preventing ILECs from deploying advanced telecommunications capability, but did not choose to do so until the threat of competition gave them an incentive.

B.         Separate Affiliate Requirement

The four-year sunset on BOC provisioning of interLATA information services should have been extended past the February 2000 deadline, as the BOCs’ ability to use such entry in an anticompetitive manner is as great a threat today as at the time of the 1996 Act was passed.  Extending the separate affiliate requirement would have been critical to ensuring that a competitive high-speed, broadband Internet market develops as the new advanced services market comes into full fruition.  The Commission shows, in response to the Section 706 proceeding, requirements that will ensure that ILEC provision of interLATA information services will not produce anti-competitive effects.  Nonetheless, the requirement that ILECs may not offer interLATA service until they obtain Section 271 approval still exists.

ILEC anti-competitive conduct and failure to open the local networks is well known and documented.  The lack of vibrant CLEC competition hurts ISPs that cannot obtain the lower prices and better service quality associated with meaningful competition.   The ILECs have also directly engaged in anti-competitive practices against ISPs.  Several of the most common forms of ILEC practices affecting ISPs are slamming, inadequate provisioning of lines, bundling, and predatory pricing.

ILECs can retain their ability to act anti-competitively after they receive Section 271 approval because of their ability to vertically integrate xDSL and Internet backbone services.  Congress recognized this danger, and required that even after ILECs meet the 271 checklist, they must offer interLATA telecommunications and information services through a   separate affiliate.

ILECs must not be permitted to use their market position to diminish consumer ISP choice.  Thus, ILECs, even after Section 271 approval, must be barred from anti-competitive joint planning, product development, and sales and marketing efforts. Extending the separate affiliate requirement for BOC interrelate information service offerings until sufficient competition exists in these markets would have gone far to prevent such activity from occurring.  In the absence of such action, the Commission must redouble its efforts to ensure that the ILECs cannot misuse their legacy position to dominate the developing advanced telecommunications capability market.

Conclusion

CIX urges the Commission to continue to support the deployment of advanced telecommunications capability to all Americans by ensuring that ILEC local facilities are fully opened for competition among data providers.

                                                                        Respectfully submitted,

                                                                                                                                                                                                                                    COMMERCIAL INTERNET EXCHANGE  ASSOCIATION

                                                                        Barbara A. Dooley
                                                                        President
                                                                        Commercial Internet eXchange
                                                                        Association