As unbundling of the local loop begins to spread across Europe, the US experience suggests that 'there's going to be plenty of courtroom battles ahead.
Nobody could deny that the telecoms sector has seen an unprecedented amount of change recently. The development, sophistication and capability of the technology has forged ahead, while the industry as a whole has continued to grow at an exceptional rate, mature, consolidate, geographically expand and technologically converge. All of this raises new issues to be addressed, new avenues for exploration, and lateral thinking in order to reach imaginative solutions.
Co-location is not, however, a new phenomenon. It is a long-established commercial practice, whereby an operator can agree commercial terms for the installation of its own equipment into the facility, or floor space, of another operator. However, although commercial co-location has been around and has been talked about for some time, a new dimension to this has now appeared on the horizon.
After what manywould consider to have been an excessively long period of waiting, a new kind of co-location is now to be made available to competitive operators in the UK.
New opportunities
The ability to co-locate in a BT exchange will, in the eyes of many, finally open the doors that they have been knocking on for a very long time. Suddenly, a whole new world will become accessible to competitive operators as never before, and a host of opportunities that have only been dreamt of will begin to emerge into reality. So what are these opportunities, and what is it about them that makes them so desirable?
The cabling link from the BT local exchange to individual business or residential premises (the local loop) is also known as the `last mile'. In the UK, this last mile has until now remained exclusively in the hands of BT, which has, as a consequence, enjoyed a monopoly over access to the business or residential customer.
The first step to gaining access to the last mile of cabling, and thereby gain direct access to the end-user, is to gain access to the local exchange. The local exchange houses the main distribution frames (MDF). BT will be offering co-location by the provision of space at an MDF site (physical co-location), or competing operators may use their own sites and request an external tie cable service from BT (distant co-location).
While co-location has always been an important issue, the advent of ADSL (asymmetrical digital subscriber line) technology has now added an extra impetus. If a competing operator were to install its own equipment in the local exchange, they would be able to compete with BT not only in the voice call market, but also in the very fast internet connection market - which could be potentially very lucrative indeed.
Regulatory wrangles
The ability to co-locate in the BT local exchanges is a very hotly-debated topic in the UK at the moment. Under the regulation of the European Parliament and of the council (COM (200) 394) and other associated EU documents, access to the local loop is to be in place by 31 December 2000. BT has stated that, in accordance with condition 83 of its licence, it has accepted requests for co-location and tie-circuit orders from September 2000. Reasonable demand for this which is made before December 2000 will be satisfied by 1 June 2001.
Part of the reason for delay is that out of the 6,000 local exchanges owned by BT, no-one but BT knows which of these are truly suitable for co-location and, perhaps unsurprisingly, it would appear from BT's statements that there are very few different figures suggest between 361 and 600 - that they consider to be suitable.
To make matters even worse, the few that are available for co-location would appear not to include main metropolitan areas such as London and Manchester. Competitors have of course launched fierce criticism of BT, and have also hit out at OFTEL (the UK regulatory body) for its perceived protection of BT's position.
Competitor expectations
Assuming that the competing operator succeeds in clearing these various hurdies (gaining approval to co-locate at an exchange that it actually wants to co-locate at, and that there is enough space in that exchange for the necessary or desired amount of equipment), what are some of the practical issues that an operator should be aware of when seeking to co-locate with the incumbent?
OFTEL has published guidelines that set out the implementation of Condition 83 of BT's licence (the condition that requires BT to allow other operators to instaff their equipment in the BT local exchange and use BT's local loop to provide services). The guidelines do not form part of the licence, but are designed to clarify the provisions of Condition 83. The principles that bind BT include that no undue preference or discrimination be given to its own business over that of competing operators; compliance with the Competition Act 1988, and the setting of prices based on cost.
The guidelines also state that OFTEL considers it reasonable for BT to provide standard co-location of equipment within four months of receiving an order - although, of course, this does not eradicate the problem of time delay altogether.
Given that there has already proved to be an issue over the available space in the local exchanges, competing operators may have to consider the future implications of this - it could have an impact on any plans for future expansion or development, and as a consequence, raise further issues concerning an adequate power supply that will support an expanded operation. Access to the local exchange, maintenance of equipment and transparency over costs are also areas that will concern competing operators.
Having found favour with a number of the concerns raised to date by competing operators, OFTEL has just published (23 November 2000) the criteria that it will expect BT to use in identifying suitable space. This sets out proposals that include the right for independent operators to verify the BT charges for the co-location facilities; the ability to commission an independent survey of an exchange when BT claims there is not enough space at a particular exchange (and arrangements for BT to pay compensation to the competing operators where this is applicable); the ability for operators to transfer space in exchanges between themselves in order to maximise the availability (known as a `use it or lose it' clause); service levels that BT should meet concerning the, availability of co-location facilities and loops, and the quality of service (and arrangements for BT to pay compensation where they fail to meet these service levels).
It is also proposed that there be a contractual dispute resolution procedure that involves independent experts, which would be in addition to the right to refer major disputes to OFTEL, as provided for under the BT licence.
The industry has yet to respond to what has been published by OFTEL, but it must ask itself some serious questions. The EU has already expressed dissatisfaction with both BT and OFTEL for the slow progress that has been made so far, and it must be asked whether the latest proposals are far-reaching enough to satisfactorily address operators' concerns. While it is clear that pressure has been applied at both a national and European level in order to speed the matter up, operators may yet find themselves seeking a greater level of comfort in order to gain the all-important access to the most popular exchanges.
Lessons from the US
So what can BT, competing providers, and OFTEL expect in the future as the colocation drama unfolds?
Certain lessons might be learned from the US market which initially deregulated in 1996. The 1996 Telecommunications Act imposed a duty on incumbent local exchange carriers (ILECs) to provide for physical or virtual co-location for competing providers. In March 1999, the Federal Communications Commission (FCC) issued rules implementing the above-mentioned requirement in its March 1999 deployment order.
The order was designed `to reduce the costs and delays faced by competitors that seek to co-locate equipment in the ILEC's central office'. Amongst the requirements of the order was the FCC's interpretation of the ILEC's duty to provide physical colocation for equipment `necessary for interconnection or access to unbundled network elements at the premises of the local exchange carrier'. The FCC had taken the position in the order that 'necessary' meant that an ILEC may not refuse to permit co-location of any equipment that is `used or useful for either interconnection or access to unbundled network elements regardless of other functionalities inherent in such equipment'.
In the case of GTE versus FCC, the US Court of Appeals for the District of Columbia Circuit on 17 March 2000 decided the meaning and scope of 'necessary' under the Telecom Act, as well as some of the sticky co-location issues between competitive carriers (CLECs) and ILECs. The court found that the portions of the order permitting CLECs to co-locate equipment that may do more than what is required to achieve interconnection and access, regardless of functionality, is broader than the connectivity and co-location mandates of the Telecommunications Act. The court cited as examples of situations where ILECs would not be required to provide co-location space to include cross connects between competitive carriers or multi-purpose equipment such as payroll or data collection features. Hence, the FCC had overstepped the court's view of truly necessary interconnection equipment. One up for the ILECs.
Next, the ILECs challenged the portions of the order requiring ILECs to make 'cageless' co-location available to requesting competitors. The court held that in the case of absent security, technical, or design/zoning reasons, the ability to co-locate in any unused, adjacent space or land in or at the ILECs premises is indeed appropriate. The court found that cageless co-location was an appropriate way to ensure that ILECs do not place unreasonable minimum space requirements on co-locating competitors, thereby increasing the cost of co-location and the likelihood of premature space exhaustion. One up for the CLECs.
The court also dealt with the portion of the order requiring that ILECs allocate the costs of infrastructure changes needed to assure proper co-location space (eg HVAC and redundant power) on a pro rata basis among CLECs according to footage occupied, so that the first co-locator in a particular incumbent premises will not be responsible for the entire cost of site preparation (or the portion which may later go unused).
ILECs argued that such an approach would force them to bear the risk of initial capital outlays for co-location-ready space for the CLECs. The court agreed with the CLECs and FCC that ILECs cannot impose such risks on new competitors and thus kill competition before it gets started by forcing the initial co-locator to bear a disproportionate share of the costs for property upgrades, even if the co-locator was only to use a small portion of the available ELEC space.
The court did, however, leave the door open for ILECs to come up with a cost recovery model approved at the state level to address some type of allocation mechanism for cost recovery for unused space.
Using the US example, BT and its competitors can expect numerous specific battles umpired by OFTEL regarding the use of available space at BT's exchanges. US court decisions and FCC regulations may provide for interesting precedents and strategic roadmaps for all future combatants. V
If this subject interests you, click #253 Conta online at uww.telecomagazine..com
[Author Affiliation]
Marie-Claire McCartney, associate with McDermott, Will & Emery. She can be contacted at mmccartney@europe. mwe.com
Christopher Donovan, partner with McDermott, Will & Emery. He can be contacted at cdonovan@mwe.com
No comments:
Post a Comment