Fitch Report: UNE-P Use Will Decline in U.S. Telecom Industry.CHICAGO -- Competitive local exchange carriers have taken advantage of the regulatory arbitrage of Unbundled Network Element Unbundled Network Elements (UNE) are a requirement mandated by the United States Telecommunications Act of 1996. They are the parts of the telecommunications network that the incumbent local exchange carriers (ILECs) are required to offer on an unbundled basis. -- Platform (UNE-P UNE-P Unbundled Network Element - Platform ) pricing to deploy more than 17 million lines. Yet the availability of UNE-P at current pricing is in jeopardy due to the U.S. Court of Appeals overturning key portions of the Federal Communications Commission Federal Communications Commission (FCC), independent executive agency of the U.S. government established in 1934 to regulate interstate and foreign communications in the public interest. (FCC (1) (Federal Communications Commission, Washington, DC, www.fcc.gov) The U.S. government agency that regulates interstate and international communications including wire, cable, radio, TV and satellite. The FCC was created under the U.S. ) Triennial tri·en·ni·al
1. Occurring every third year.
2. Lasting three years.
1. A third anniversary.
2. A ceremony or celebration occurring every three years. Review Order (TRO TRO - tail recursion optimisation ). Changes to UNE-P will have a material near-term affect on local exchange services, but the long-term outlook for the industry is unchanged, according to a report issued by Fitch Ratings.
As interim and final policy proposals regarding UNE-P are developed, Fitch believes there are several industry developments that appear certain. UNE-P will experience material rate increases both on existing and future line deployments that will reduce the competitive attractiveness of this vehicle. Competitors will change focus from UNE-P deployment to superior technologies such as voice over the Internet protocol (VoIP) to compete for customers.
While the regional Bell operating companies (RBOCs) could experience some near-term benefits from UNE-P changes, Fitch's long-term industry outlook remains unchanged: that the most successful telecom companies will be those that can provide most complete service bundles, the ability to service the broadest customer set with the most favorable cost structures. The report finds that the RBOCs could experience some immediate cash flow improvements due to price increases and a slowing of retail to wholesale service migration. However, over the long term, VoIP and wireless services will continue to exert significant pricing and substitute-service pressure on local exchange service, leading to lower prices and margin compression.
For the full report, see 'The Effect of UNE-P Decisions on the Telecom Industry,' dated July 22, 2004, on the Fitch Ratings web site at 'www.fitchratings.com'.