Lawyers have had the night to dig over the FCC's triennial review, though the true impact of the decision will take some time to be fully understood. --

Covad CEO Charles Hoffman notes that while the FCC's decision is "still fundamentally flawed", it's "better than what many anticipated in February." The 578 page report does include some changes not mentioned in the February ruling, including preservation of Covad's access to full DSL loops and interoffice transport, and stronger rules regarding T-1 loops.

It's linesharing that should be cause for worry. A grandfathering provision for Covad Communications allows the company to maintain currently line-shared customers at current rates, a nice break for the company and existing customers. For the next several years linesharing won't be drastically altered; but after that, things will undoubtedly get hairy.

During the next year, new line sharing customers are subject to 25 percent of the stand alone loop rate dictated by the customer's location. After a year passes, that cost increase hits 50 percent; after two years, it jumps to 75 percent. After three years from this week's ruling, Covad and other CLEC's are essentially at the mercy of the telcos, who are free to charge what they like. SBC has agreed to continue to provide "reasonable rates" to the CLEC, but it's unlikely that Verizon and others will be equally amicable. And likewise, SBC may not be as friendly to other CLEC's.

Another break for CLEC's is that the ruling preserves line splitting with the unbundled network element platform (UNE-P). Essentially that means that DSL CLEC's can still snuggle up to local competitors offering competing local and long distance services, sharing the lines and offering bundles provided voice service is in the mix. "Even before the FCC decision we were accelerating our focus towards line-splitting agreements with bundles of voice and data services for residential customers as demonstrated by our agreements with AT&T and Z-Tel," says Hoffman.

Still, Hoffman's earlier claims that the ruling has "no effect" on the company's business seems overly optimistic. While 60% of Covad's business (access to second-line loops and T1 facilities for businesses) remains unaffected, that still leaves 40% at the mercy of future negotiations.

The ruling also increases states' authority to decide which parts of the phone networks owned by the bells must be left open to competitors at discounted rates. This was no surprise, and it's the primary reason that several of the bells, most notably SBC, has been busy spending oodles of lobbying cash in the hopes of killing off any state level regulatory oversight. Still, competitors are well aware that by leaving some power on the state level, they can be sporadically successful in protecting their interests via litigation. And in the haze of what this ruling means to the industry, one thing is certain: you can expect the courts to be flooded over the next several years.

"We are confident that the state public utility commissions will make fair determinations in their role of implementing the FCC's order so the public will benefit from the growing local telecom competition," noted Tom Gerke, executive vice president for Sprint, in a written statement.

The ruling is complex, and attorneys are still poking at the language to make their respective cases. Consumers Federation of America spokesman Mark Cooper says the organization will "be battling to get them reversed." The ruling "simply surrenders to the wishes of the incumbent telephone monopolies and grants far-reaching and premature deregulation" said AT&T's vice president for federal regulatory affairs, Robert Quinn.

The harshest criticism of the ruling comes from several of the commissioners themselves. Commissioner Michael J. Copps claims the ruling "plays fast and loose with the country’s broadband future," clarifying his position by adding: "Make no mistake about it, today’s decision chokes off competition in broadband. Consumers, innovation, entrepreneurs and the Internet itself are going to suffer." "We may be headed in the direction of a broadband policy blackout from which we will not soon recover," Copps opines.

FCC chief Mike Powell, who says the ruling will spur broadband investment, expects to see, as he puts it, a "litigation bonanza". Powell, like seemingly everyone else, floats somewhere in the middle in regards to what the FCC has accomplished. "There are some important achievements in this Order that have long been objectives of mine; namely, substantial broadband relief," Powell notes in his 17-page statement available at the FCC website. "Yet, regrettably, there are some fateful decisions as well that I believe represent poor policy and which flout the law."

Even the telcos, who have been quiet thus far as their attorneys dig through the ruling, are floating somewhere in between glee and disgust. Tom Tauke, Verizon's SVP for Public Policy and External Affairs, is concerned that the ruling may already be antiquated. "It took the FCC two years to decide and write the order; we need time to read and understand it.....The world is changing so fast that the order may already be outdated. Every day it becomes more and more apparent there's a whole new world of communications around us that connects people in ways that weren't even imagined just a few years ago."

We spoke to Speakeasy chief Mike Apgar about how he expects the ruling to affect his business model. Apgar says the line sharing agreements are consistent with what the FCC indicated last February, and remains optimistic that the ruling won't drastically impact the DSL provider's business plans.

"Covad and others are very likely already working on commercial arrangements with the ILEC's to continue line-sharing indefinitely." says Apgar. "In fact, I think the ILEC's were somewhat surprised by the line-share ruling, in that they were much more focused on getting relief from UNE-P (Voice Loops including lease of their voice switches), something they did NOT get here. ILEC's must compete with cable, and some of them see providing line-shared loops to alternative carriers, Covad included, is a net positive in this regard."

Like others, Apgar expects considerable litigation, though maintains that a "wait and see" approach is in the industry's best interests. Still, Speakeay's chief believes that his company's quality of service will overshadow any potentially damaging changes to the industry. "Six out of seven of our new customers are switching from another broadband service provider that failed to meet their needs in one form or another," he says. "We have anticipated an FCC ruling in essentially this form for over a year," adding that his company is "well positioned to grow and continue to address this market demand indefinitely."