Covad is quick to take advantage of UNE-P rules left intact by the triennial review, while the bells sue the FCC over the "loophole" in their competitive plans. -

Both the majority of the baby bells and the United States Telecom Association (USTA) filed suits last week over the FCC's preservation of the unbundled network element platform (UNE-P) guidelines. The rules allow smaller telco competitors (and small broadband providers if they offer or bundle voice services) to continue sharing the bell lines at discounted rates. The FCC's decision to keep UNE-P intact "really starts to call into question the FCC's ability to be timely, relevant and constructive in today's communications marketplace," says USTA Chief Executive Officer Walter McCormick.

Wasting no time in taking advantage of the ruling, Covad today announced the company would be extending their partnership with MCI. The deal gives MCI access to Covad's 1,800 central offices, and allows Covad continue to offer DSL over UNE-P shared lines without being subject to the coming price increases facing bell line-shared DSL connections. According to Covad's press release, 10 million UNE-P lines are in service, a number number that is expected to double by 2005.

"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 Covad CEO Charles Hoffman.

When the original FCC ruling was announced last February, questions about CLEC survivability emerged, since line-sharing was set to be "phased out". However a grandfathering provision allows DSL CLEC's to maintain current line-shared customers at the already agreed to rates, a nice break for existing line-shared customers and the CLECs that service them.

It's something that doesn't sit well with telcos however, and industry reps were quick to exchange barbs after the lawsuits emerged last week. "Our customers are being required to subsidize huge corporations like AT&T and MCI, and the subsidies need to end," opined Steve Davis, Qwest senior VP of policy and law. "We're required to provide switches to MCI and AT&T at prices that are below cost. There's no reason these companies can't purchase and install switching equipment on their own. It's unfair to us and unfair to our customers," Davis says.

According to MCI spokeswoman Carolyn Tyler, "The Bells just can't stand the thought of any competition in their monopoly markets."

New line-shares are subject to continual 25% price hikes over three years, after which it's up to the CLECs to negotiate rates independently with the telcos. For the time being UNE-P guidelines allow the CLECs to use voice bundles to avoid such charges. Since the Triennial review dumps a large portion of the decision making in the laps of the states, legal pugilism on the state and federal level is expected, and will alter how these rules play out on a state-to-state basis.