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Keith G. Knightson
Deregulation of the telecommunications market is under way in many countries, including the U.S., the U.K., the nations of the European Union, and Japan. This chapter examines various deregulation initiatives and the measures being taken by the 1996 Telecommunications Act to ensure fair competition among telecommunications companies.
There is a big difference between deregulation and the practical establishment of a competitive market. The term deregulation usually means the elimination of a monopoly in a public market. The dominant carrier who held the monopoly before deregulation is often referred to as the incumbent.
The intent of deregulation is to create an open and competitive market. The problem in actually creating such competition is the difficulty that newcomers (i.e., new entrant carriers) have in competing with a well established incumbent. Unless this problem is addressed, deregulation may not result in competitive supply, and incumbents will retain de facto monopoly positions.
The initiatives being undertaken by the various national regulatory authorities, including the Federal Communications Commission (FCC), are concerned with the practical aspects of establishing an open marketplace subsequent to actual deregulation.
Many countries have been deregulated for years the U.S. since 1974, the U.K. since 1983, and Japan since 1985. The European Union has set a target date of 1998 for a fully open European market. Many countries that have been deregulated for some time have, based on their experiences, instituted new telecommunications acts or amendments.
In most cases, the original basis for interconnection between competing organizations depended solely on bilateral negotiations between the parties concerned. In all cases, the various national regulatory bodies usually retain the power to arbitrate and issue orders when negotiations between an incumbent carrier and a new entrant carrier fail to reach an agreement. This hands-off approach has led to:
This situation is part of the natural process of developing competition. Drastic changes, such as those involved in moving from a total monopoly to fair competition, are bound to produce unforeseen consequences and associated growing pains.
Incumbents, even if forced by license or statute, do not voluntarily grant interconnection to competing network operators. Without regulatory arbitration, negotiations simply break down. The Ministry of Posts and Telecommunications in Japan and OFTEL, the national regulator in the U.K., have learned this lesson from experience. The new 1996 US Telecommunications Act addresses these issues.
The 1996 Telecommunications Act and the accompanying FCC commentary were published in August 1996. The principle goals of the act include:
The act directs the FCC and its state colleagues to remove not only statutory and regulatory impediments to competition, but also the operational impediments. Incumbents are mandated to take steps to open their networks to competition, including providing interconnection and offering access to unbundled elements of their networks.
The FCC identifies a minimum set of five technically feasible points at which incumbent local exchange carriers (LECs) must provide interconnection, including:
In addition, the point of access to unbundled elements also is technically a feasible point of interconnection. The FCC also anticipates and encourages parties, through open, multilateral negotiation and arbitration, to identify additional points of technically feasible interconnection.
Section 251 of the Telecommunications Act also requires LECs to provide access to network elements on an unbundled basis at any technically feasible point, including:
Section 251 also states that the commission will consider, at a minimum, whether:
The lack of a clear standard is not sufficient reason to deny access. Public standardization at agreed-upon interface points are in the interests of all parties.
Local Loop. A local loop situation can be quite complex because of the variety of transmission techniques and concentration points. However, the FCC requires incumbents to provide access regardless of technology or concentration. Thus, this requirement embraces integrated digital loop carrier (IDLC), two- wire and four- wire voice grade loops, and two-wire and four-wire voice grade loops conditioned to provide such services as integrated services digital networks (ISDN), asynchronous digital subscriber lines (ADSL), high bit-rate digital subscriber lines (HDSL), and DS1- level signals.
IDLC carries aggregated loop traffic from the point of concentration in the LECs loop facilities directly to the switch via a multiplexed circuit. ADSL provides a high-speed downstream data path, a medium-speed upstream data path, and an analog voice path. HDSL provides 768K-bps data over two-wire and 1.544M bps over four-wire. Therefore, the granularity of unbundling is clearly an important issue.
On the question of this granularity, the FCC declines to define a loop in terms of specific elements or functions, relying on the fallback position of technically feasible points. However, that raises the subject of subloop unbundling, which would provide carriers with access at various points along the loop between the local exchange and the customer premises. Additionally, this would enhance competition because the competitor would only need to purchase loop facilities that they could not provide over their own feeder infrastructure.
The FCC will monitor the mechanics of achieving the desired level of interconnection and unbundling. Nondiscriminatory access to public telecommunications networks will be established through:
The Telecommunications Act states that the FCC can participate, in conjunction with the appropriate industry standards-setting organizations, in the development of interconnectivity standards that promote access to:
The Network Reliability and Interoperability Committee was established under this mandate.
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