*Pages 1--2 from  Microsoft Word - 31397*
 STATEMENT  OF  COMMISSIONER  JONATHAN  ADELSTEIN 
 Re:  Review  of  the  Commission’s  Rules  Regarding  the  Pricing  of  Unbundled  Network  Elements  and  the  Resale  of  Service  by  Incumbent  Local  Exchange  Carriers,  WC  Docket  No.  03-  173 
 I  lend  my  support  to  today’s  Notice  because  I  believe  that  it  is  reasonable  and  appropriate  to  look  once  again  at  our  pricing  rules  for  unbundled  network  elements,  interconnection,  and 
 resale  of  service  under  Sections  251  and  252  of  the  Act.  These  pricing  rules,  while  certainly  esoteric,  have  an  enormous  impact  on  the  telecommunications  industry  and  on  consumers.  If 
 prices  for  unbundled  network  elements  are  too  high,  competitors  may  face  much  greater  hurdles  than  Congress  intended  --  particularly  given  our  recent  decision  in  the  Triennial  Review  Order, 
 that  limits  unbundling  to  those  facilities  for  which  competitors  are  truly  impaired  --  and  may  be  limited  in  the  services  which  they  can  offer.  On  the  other  hand,  if  the  prices  for  unbundled 
 elements  are  too  low,  this  could  have  serious  consequences  for  our  nation’s  incumbent  carriers.  For  the  American  consumers  who  obtain  more  than  18  million  lines  from  competitors  by  resale 
 or  unbundled  elements,  our  decision  can  mean  the  difference  between  having  a  choice  of  providers  or  returning  to  a  world  of  one  option.  So,  the  stakes  are  high. 


 While  I  am  sympathetic  to  concerns  that  this  Notice  may  open  another  source  of  regulatory  instability,  it  has  been  seven  years  since  the  FCC  adopted  these  rules  and  this  is  the 
 first  comprehensive  review.  Through  the  Triennial  Review  process,  our  section  271  review,  and  discussions  with  carriers,  numerous  concerns  have  been  raised.  We  must  look  carefully  at  these 
 concerns  and  it  is  fair  to  open  this  dialogue. 
 That  said,  I  enter  this  proceeding  with  a  very  open  mind.  Our  TELRIC  pricing  rules  have  been  challenged  in  almost  every  forum  and  on  just  about  every  basis  since  their  adoption  in 
 August  of  1996.  Despite  those  challenges,  our  rules  have  been  upheld  by  the  highest  court  of  the  land.  The  Supreme  Court’s  affirmation  of  our  rules  sent  a  strong  signal  that  the  Commission  had 
 struck  the  right  balance.  Indeed,  by  making  parts  of  the  incumbents’  network  available  to  competitors  at  economic  cost,  our  rules  enable  consumers  to  reap  the  benefits  of  the  incumbents’ 
 economies  of  scope  and  scale,  as  well  as  the  benefits  of  competition.  Moreover,  the  investment  that  these  rules  have  encouraged  has  been  remarkable;  as  noted  by  the  Supreme  Court, 
 competitors  have  invested  approximately  51  billion  dollars  between  1996  and  2000,  which  is  now  up  to  71  billion  dollars  according  to  recent  estimates.  I  recognize,  however,  that  there  may 
 be  ways  to  improve  these  rules. 
 Given  the  Supreme  Court’s  endorsement  of  our  existing  rules,  the  importance  of  this  proceeding,  and  the  fact  that  we  have  no  direct  record  on  these  issues,  I  would  strongly  prefer  to 
 issue  this  Notice  without  any  tentative  conclusions,  simply  seeking  comment  on  how  we  might  improve  our  rules.  The  Notice  seeks  comment  on  several  alternatives  for  modifying  our  rules, 
 but  I  am  pleased  that  the  item  does  not  specifically  endorse  any  single  alternative  methodology.  I  nonetheless  join  in  a  limited  tentative  conclusion  that  our  TELRIC  rules  should  more  closely 
 account  for  certain  real-  world  factors  –  namely,  the  routing  and  topography  of  the  incumbent  LEC’s  network.  Because  this  issue  has  become  a  flash-  point  for  criticism  of  our  TELRIC  rules,  I 
 believe  that  it  is  worthwhile  to  signal  to  the  outside  community  that  the  FCC  has  concerns  about 
1
 how  our  rules  account  for  these  factors.  I  should  make  clear,  however,  that  I  remain  open  to  all  possibilities  in  this  proceeding  and  will  look  carefully  at  the  evidence  filed  on  this  and  other 
 issues. 
 It  is  critical  that  we  develop  a  full  and  comprehensive  record  in  this  proceeding  and  that  we  not  rush  to  judgment  before  analyzing  this  record.  To  this  end,  I  encourage  and  fully  expect 
 that  we  will  see  active  participation  by  our  colleagues  from  the  state  public  utility  commissions.  They  have  front  line  experience  implementing  our  rules  and  are  perhaps  best  positioned  to 
 explain  how  the  current  rules  have  been  implemented,  where  they  are  ambiguous,  where  they  are  problematic,  and  where  they  have  functioned  well. 


 I  would  like  to  thank  my  colleagues,  particularly  the  Chairman,  for  seeking  our  input  on  this  item  and  working  to  accommodate  many  of  our  concerns.  I  would  also  like  to  thank  Bill  and 
 his  team  for  their  hard  work  on  this  item  and  to  wish  them  well  as  we  kick  off  what  will  be,  I’m  sure,  a  challenging  proceeding. 
2