Friday, July 6, 2007

Confiscation of ILEC Property?

The Telecommunications Act of 1996 ordered incumbent local exchange carriers to unbundle their networks as one of their common carrier interconnection responsibilities. Specifically Section 251 establishes “the duty to provide, to any requesting telecommunications carrier for the provision of a telecommunications service, nondiscriminatory access to network elements on an unbundled basis at any technically feasible point on rates, terms, and conditions that are just, reasonable, and nondiscriminatory in accordance with the terms and conditions of the agreement and the requirements of this section and section 252. An incumbent local exchange carrier shall provide such unbundled network elements in a manner that allows requesting carriers to combine such elements in order to provide such telecommunications service.”

Incumbent carriers have claimed that the FCC’s implementation of this requirement resulted in a taking or confiscation of their property. In a previous post I reported that the Supreme Court validated the general implementation plan of the FCC even as lower courts rejected specific elements of the plan.

I’m trying to delve more deeply into whether and how an interconnection responsibility of a telecommunications common carrier might violate their property rights. An argument could be made if the interconnecting carrier ended up having to invest in more facilities to accommodate the aggregate demands of carriers requesting interconnection using unbundled network elements. Likewise an argument could be made that interconnection foreclosed other more profitable undertakings, a type of opportunity cost.

But neither worst case scenario ever occurred. Using the FCC’s statistics, at the high point of having to accommodate competitive local exchange carrier unbundling requirements the incumbent carriers had to release 13.5% of their lines to competitors. See, Table 4. The most recent figure is 9.3%.

Bear in mind the incumbent carriers received compensation for leasing lines. They dispute the rate of compensation, because pricing using forward looking, replacement costs or the long run incremental cost falls below—possibly well below—what the incumbent carrier would demand in commercial negotiations or what it would file as a tariff rate at the FCC.

Accepting the argument that unbundled network elements were provided at less than fully compensatory rates, the incumbent carriers surely had ample capacity to satisfy a lawful mandate while also seeking higher profits from their own retail and wholesale customers.

How could allocating no more than 13.5% of inventory, available at compulsorily "promotional" rates, constitute a taking?

1 comment:

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