The FCC has voted 3-2 along party lines to tentatively eliminate and/or reduce requirements that incumbent local exchange carriers (ILEC)s unbundle (share) elements of their networks with competitors at regulated rates. 

ILECs are those who were providing service before the 1996 Telecommunications Act (and its unbundling and resale provisions), primarily the former Bell operating companies (AT&T, Verizon, Centurylink).

Related: Spalter Says Everything Has Changed But the Rules

The FCC majority, in approving the notice of proposed rulemaking (NPRM), agreed that incumbents like AT&T and Verizon have gone from being monopolists to having only 12% of voice traffic, and provide only 20% of residential broadband at or above the FCC's high-speed definition of 256 Mbps/3 Mbps, with competition from "cable, voice over Internet protocol, fixed wireless, and mobile wireless services," the FCC said. 

FCC Chairman Ajit Pai said the idea was to remove the obligations that "unnecessarily burden incumbent carriers and reduce incentives for incumbents and competitors alike to deploy and transition to next-generation networks." But acknowledging that requiring the incumbents to share can be a benefit in areas where there is less chance of competition without it. "To strike the right balance," he pointed out, the item also proposes to maintain unbundling of broadband-capable lines in rural areas. 

In explaining her dissent, commissioner Jessica Rosenworcel said she was open to discussing the changes, but thought the FCC should have started with a notice of inquiry, and take out the tentative conclusions that there should be unbundling "to avoid prejudging the outcome." 

Commissioner Geoffrey Starks said that he did not see an urgent need for "a further rollback of pro-competition tools," and said the NPRM proposals would "compound harms by making it more difficult for smaller competitors to compete for government contracts." 

INCOMPAS, which represents the competitive local exchange carriers and others, as not pleased.  

“The FCC’s “unbundling” is bad news for 5G network builders and helps bailout AT&T who has told Wall Street they plan to 'milk' profits from old lines, while cutting $3 billion from new network investment. The FCC just spent 16 months reviewing this issue, and rejected big telecoms’ forbearance because it would hurt consumers and government agencies – including the US military, Homeland Security and public safety organizations – that depend on competition’s faster speeds and affordable prices.  

“Worst of all, the FCC plans to rely on flawed data from the broken broadband maps to justify cutting off competition in rural communities. We believe killing competition before fixing the maps is bad policy, terrible politics and legally flawed.” 

USTelecom, whose members include AT&T and Verizon, saw it as matching the regs to the realities. "[T]here is no rational argument in 2019 to subject only incumbent wireline providers – that already face stiff competition – to outdated, intrusive and unfair rules that do not apply to any other providers," said USTelecom President Jonathan Spalter. "The 1996 unbundling rules were supposed to spur facilities-based competition (mission accomplished), not extend discount access rates to competitive carriers in perpetuity. 

“For this FCC, modernizing regulations has been a top priority, and this unbundling fix falls squarely under that rubric. Everything has changed in our turbo-charged communications sector since 1996. Everything except the unbundling rules. It’s time those changed too.”

Some top ILECs including AT&T, Frontier and CenturyLink, are telling the FCC that it should scrap the business data services analysis on which it based its refrom proposals, saying that cable operators lowballed the number of locations that should be deemed competitive.

The ILECS (incumbent local exchange carriers) have filed a petition asking the FCC discount as "irretrievably flawed" the data underlying its politically divided vote April 28 to propose remaking the business broadband marketplace and potentially regulating rates for cable operators' special access service.

The FCC is phasing out the presumption of regulating the rates of historically "dominant carriers" -- the ILECs (incumbent local exchange carriers) -- as a way to boost competition from "nondominant" CLECs (competitive local exchange carriers) and from cable competitors, and instead regulate the rates of any of them as it deems necessary.

They pointed to "recent acknowledgements by four of the largest cable providers that they significantly undercounted the number of locations that are capable of providing business data services and thus deemed competitive. In fact, the cable companies’ most recent FCC filings reflect 22 times more Ethernet-capable locations than the data on which the FCC based its May 2 further notice of proposed rulemaking (FNPRM)."

They cited ex parte filings by Cox, Comcast, Charter and Time Warner Cable saying they "had not reported locations connected to nodes that had been physically upgraded to enable the provision of Ethernet-over-HFC service as of 2013," according to CenturyLink et al.

Cable operators say the FCC asked the question about locations in two different ways--where service was provided, then where it could be provided without too much diffulty--and answered both questions fully. Cable operators also asked the FCC to extend the comment period for the proposal, which was denied.

But the ILECs say initially excluding that second, more complete, answer "massively distorted the competitive landscape," particularly the finding of market power by ILECs, which they say is fatally flawed.

“We are extremely concerned that the FCC’s latest business broadband proposal is now based on fatally flawed data that, unless corrected and updated, could have serious economic consequences for the business broadband market,” said CenturyLink SVP John Jones in a statement about the petition. “We’re asking the FCC to rescind the affected portions of its proposal and update its data before pronouncing judgment on what is or isn’t competitive.”

The National Cable & Telecommunications Association, whose members include those four cable operators, had no comment on the petition.