**Statement of**

**Chairman Michael K. Powell**

*Re: Unbundled Access to Network Elements, WC Docket No. 04-313; Review
of Section 251 Unbundling Obligations of Incumbent Local Exchange
Carriers, CC Docket No. 01-338.*

Today's decision does two critical things: It starts a rulemaking to
quickly replace rules within 6 months, swept away by a court incensed by
the Commission's persistent refusal to apply the law faithfully. Second,
it puts in place an interim freeze for 6 months, ensuring consumers and
competitors are protected while we complete our work. Contrary to the
inaccurate assertions being thrown around, there are no automatic price
increase after 6 months for facilities providers. Today's Order only
seeks comment on a transition that will not be necessary if the
Commission gets its work done.

Over a year and a half ago, I dissented from the Majority's
ill-considered decision to preserve at all costs a repudiated mode of
competition---UNE-P. I took that position on policy grounds, but my
greatest concern was the prolonged uncertainty it would unleash. I
believed, given that this modality had twice before been struck down by
the courts, it was a reckless decision that was sure to meet a similar
fate, which, in turn, would plunge a fragile market into even further
chaos. I wrote: "I fear as much or more for competitors as I do for
incumbents, for the prolonged uncertainty . . . may prove stifling."[^1]
Despite the warning, we forged ahead and now we embark for the fourth
time on an effort to write rules that promote local competition. Getting
it right this time, without clever shortcuts, is vital.

I want to make one essential point at the outset, given the melodrama of
my dissenting colleagues: There are not automatic price increases after
6 months for facilities providers. Such assertions are flat wrong. I
elaborate on this more fully below.

I am not a fan of UNE-P as the vehicle for parking our aspirations for
vigorous voice competition. It is a synthetic form of competition that
would never have proved sustainable, or have provided long-lasting
consumer benefits. I believe government policy should encourage
intermodal and intramodal facilities-based competition. Bringing some of
your own infrastructure to the table allows a competitor to offer a
differentiated service to consumers. It allows a competitor to control
more of its costs, and thus offer consumers potentially lower prices. A
facilities competitor is less dependent on its major competitor for its
service---an unenviable position for any competitor. And, a facilities
competitor helps create vital redundant networks that can serve our
nation if other facilities are damaged by those hostile to our way of
life. Facilities competition is real competition and it is emerging
everywhere.

There is no need to fear that consumers will be left with nothing to
choose from as UNE-P begins to whither. Consumers are using wireless
telephones more than they are using wired telephones today---many now
use their mobile as their primary phone. Cable companies are offering
competitive telephone service to residential consumers. VoIP is surging
into the marketplace as broadband grows, offering an exciting and new
competitive alternative that offers cut-rate prices and futuristic
features. Indeed, the venerable AT&T is pushing its own VoIP consumer
service and re-entering the consumer wireless market. Aggressive AT&T
advertisements for VoIP, touting the re-invention of the telephone, are
blanketing the airwaves during the Summer Olympic Games. And, recent
reports show Ma Bell has teamed up with cable providers to offer this
service in direct competition to the Bells.[^2] I applaud these
developments.

I also have consistently supported intramodal competitors that are
facilities-based. Carries like Covad, NuVox, McLeod and XO have been
important contributors to competition. In the *Triennial Review Order*,
I supported fully requiring incumbents to unbundle DS1 loops and
transport, as did every one of my colleagues. I remain steadfastly
committed to providing the key network elements to these facilities
competitors in this proceeding, without which they would be impaired.
Indeed, I am quite confident that we will be able to provide these
elements, once we have a full and complete record, consistent with the
guidance of the court. We will move to do so as quickly as possible.

It is exceedingly important for the Commission to rewrite the new rules
of competition as fast as it can. As I predicted in the *Triennial
Review Order*, the course the Commission took a year and a half ago has
led to more uncertainty that risks stifling investment. Clarity is
needed to repair the damage. The court has vacated the competition rules
and we need to work to fill the void. As an interim step, today we
freeze any changes in the current competition rules for six months, to
protect consumers from any sudden disruption in service. This will give
us the time we need to repair the rules. I have committed to push the
Commission to complete this proceeding in six months, before the freeze
expires. As a sign of that commitment, I have already scheduled the
decision for a vote at our December 2004 open meeting. I insist the
parties and urge my colleagues to move heaven and earth to ensure we
meet this objective. Consumers demand it and competitors and incumbents
alike need it.

In addition to an interim freeze, we also seek comment on a transition
proposal that will only take effect if the Commission does not act on
final rules, or fails to justify an unbundled element. It is important
to emphasize that no transition will be required, or go into effect if
we meet our objective to finish the rules and re-justify necessary
inputs. In other words, no price increases if we get the job done, which
I am fully confident we will. For example, I have expressed a commitment
and some confidence that DS1 loops and transport will remain unbundled
elements for facilities-based providers. Should the Commission adopt
final rules along these lines, facilities competitors will not be
subject to price increases, or special access pricing. Indeed, I expect
that will be the case.

Some parties wanted even more to be done to make elements available
right this minute. I fully empathize with the desire to re-unbundle key
elements immediately. A business loathes even a brief period of
uncertainty. However, I believe there is no lawful way to order an
incumbent to provide an element indefinitely that the court vacated with
gusto. To do so now, without notice or comment from the public is a
hazardous and unlawful course to take. To do so is to flaunt the court's
decision and would lead, I am sure, to the court vacating our interim
rule and perhaps making it even more difficult to sustain good
competition rules. This is an unacceptable risk, for short-term gain.
This is the game we played before that cost so dearly and I doubt
seriously the court would be amused to play it again. It might be worth
repeating the court's own words when it wiped these rules from the
books: "This deadline is appropriate in light of the Commission's
failure, after eight years, to develop lawful unbundling rules, and its
apparent unwillingness to adhere to prior judicial rulings. *So
ordered*."[^3] Will we ever learn?

Before concluding, I must reject utterly the inaccurate and revisionist
statements of my dissenting colleagues. The unbundling rules have been
tossed out because of their ill-considered UNE-P decision. We are
working now to pick up the pieces. We are not free to simply plop the
rules back into place as they seem to think. Second, they bemoan the
harm to facilities competitors by our action today, while simultaneously
refusing overtures by us to modify today's decision to provide greater
confidence to this community going forward. They seem prepared to
inflict harm on companies, in order to maintain the political purity to
criticize today's well-considered step to reconstruct a regime blown
down by the court's rejection of their approach.

Nonetheless, I believe a majority of the Commission is committed to
providing a sound decision that will allow competition to flourish. I am
confident that we can put in place the fundamentals of sustainable
competition and get this right for American consumers.

[^1]: *See Review of the Section 251 Unbundling Obligations of Incumbent
    Local Exchange Carriers, Implementation of the Local Competition
    Provisions of the Telecommunications Act of 1996, Deployment of
    Wireline Services Offering Advanced Telecommunications Capability*,
    CC Docket Nos. 01-338, 96-98, 98-147, Report and Order and Order on
    Remand and Further Notice of Proposed Rulemaking, 18 FCC Rcd 16978,
    17519 (2003) (*Triennial Review Order*), *corrected by* Errata, 18
    FCC Rcd 19020 (2003).

[^2]: *AT&T dials up VoIP service with cable deals*, USA Today, Aug. 19,
    2004; *AT&T, Cable Providers Join Forces*, Wall Street Journal, Aug.
    19, 2004.

[^3]: *United States Telecom Ass'n v. FCC* , 359 F.3d 554, 595 (D.C.
    Cir. 2004), *pets. for cert. filed*, Nos. 04-12, 04-15, 04-18 (June
    30, 2004).