UNE Forbearance from Unbundling Obligations Fails FCC Tests

by: Tech101

In a BusinessWire news release on November 13, 2007, Covad (DVW) and XO Communications (OTC:XOHO) cite new evidence showing Verizon’s (NYSE:VZ) UNE Forbearance Petition for New York Fails Omaha Standard.

The new market share analysis by Covad and XO Communications

shows that the facilities-based market penetration level for a key Verizon competitor in the New York MSA falls far short of the level understood to have been required by the FCC to approve past requests for forbearance from key unbundling obligations.

The implications of the news release are here:

  1. In order for larger carriers such as Verizon/ATT (NYSE:T) to get waiver for the requirements to offer cost-based (discounted) rates to smaller carriers to allow competitions, the petitioner (VZ) must prove that facilities-based competitors have achieved, at a minimum, at least the level of competitive market penetration that existed in Omaha at the time of the Omaha Forbearance Order.
  2. Time Warner Cable (TWC) - the major competitor of VZ in the NY Metropolitan Statistical Area [MSA] - has a far less penetration rate in the residential or business market in that area than required by the Omaha Forbearance Tests;
  3. Therefore, Verizon could be forced to provide unbundled network elements [UNE] to all facilities-based CLECs, including Covad and XO at cost-based rates for access to their business and residential customers;
  4. TWC now faces more competitions not only from Verizon, but also from smaller competitors, such as Covad and XO.
  5. The ILECs (ATT, Verizon, Qwest (NYSE:Q)) could be challenged to pass the Omaha Forbearance Tests in all other Metropolitan Statistical Areas [MSA] other than New York;
  6. All residential and business customers in NY and other metropolitan areas could benefit from a more competitive environment - better services and lower price from

a) ILEC - large telecom carriers: ATT, Verizon, Qwest

b) Cable companies (MSOs) - Comcast (NASDAQ:CMCSA), Time Warner, Cablevision and

c) Facilities-based CLECs - Covad, XO Communications, Level 3 (NASDAQ:LVLT), TWTC, CCOI and others.

Disclosure: Author has a long position in XOHO.OB