eXpeTel Joins Forces With Phone Companies to Offer FCC Compromise on UNE War
By: Josh Long / Phone + Magazine
November 15, 2002
JACKSON - Ten local phone companies have filed a proposal with the Federal Communications Commission offering what may be the first formal compromise over one of the most poignant telecommunications debates of the year.
Under a proposal filed with the FCC Nov. 6, local phone companies would be required to buy their own switches rather than leasing the Bells' gear after acquiring enough customers to justify a network investment. The state public utility commissioners -- not the federal government -- would be ultimately responsible for determining that threshold among other factors related to the availability of network elements.
However, the Bells must first eliminate obstacles that stymie an expedient and smooth migration from the incumbent's network to a competitor's switching facility, the telephone companies said in their proposal.
The proposal, negotiated by telephone reseller Talk America, was more than a year in the making and offers the Bell companies and their rivals a compromise in an emotionally charged controversy rife with rhetoric.
"We are not looking for a free ride," said Gabe Battista, the chairman and chief executive officer of Talk America. "We are just trying to figure out how to compete."
The FCC is slated to issue rules that will govern the availability of the Bells' local networks under a pricing method the Supreme Court recently upheld. Regulatory sources are doubtful the FCC will issue its rules by the end of the year and say it is more likely the agency will issue them by the end of the first quarter of 2003.
The rules will shape the future of local phone competition and heavily influence how Wall Street responds to a scandal-ridden market that has lost an estimated $2 trillion in equity value over the last two years, pundits say.
Following the passage of the 1996 Telecommunications Act, new companies had been given an opportunity to provide residential and business customers local phone service through a resale method known as the unbundled network element -- platform. The platform allows phone companies to lease the Bells' local lines, including their switches, under a pricing model based on the incumbents' forward-looking costs.
Scores of competitors shelled out tens of millions of dollars to build their own networks in the late '90s and went belly up before they had the chance to acquire enough customers to pay their debt and get out of the red. Only recently have local telephone companies such as Talk America turned profits and built a large customer base, which still seems a small one compared with the Bells' huge market share.
Many companies that have relied on the UNE-P say it would be virtually impossible to enter a Bell region without having access to the platform because it is too costly to build a network and the margin often isn't great on straight resale of the Bell networks.
But the Bells, led by No. 2 local phone company SBC Communications Inc., insist they are being forced to lease their networks to their rivals at a price that falls below their costs, discouraging incumbents from dumping billions of dollars of capital into new technology on concerns that rivals will tap the infrastructure on the cheap.
At the core of the debate is whether competitors should have access to switching facilities under the UNE-P. Switches are so prevalent, one recently quoted line goes, you can buy one on eBay. And they are cheap, about a third of the cost compared to a few years ago, other sources say.
However, here is the problem and the proposed solution. Competitors cannot buy a $1 million core switch without first owning a large base of customers to justify that investment and achieve economies of scale. Talk America pegs that threshold at about 60,000 lines, and its executives are considering buying switching equipment.
Combined, the companies submitting the proposal to the FCC are reselling about 500,000 UNE-P lines. They include: Access One Inc., AmeriMex Communications Inc., Broadview Networks Inc., Eschelon Telecom Inc., eXpeTel Communications, ionex Telecommunications Inc., Midwest Telecom of America, Spectrotel, Talk America and Vycera Communications.
The two trade associations representing Bell competitors, the Association of Communications Enterprises (ASCENT) and Competitive Telecommunications Association (CompTel), have not officially sponsored the proposal.
However, Battista said they have been helpful. George Vinall, Talk America's executive vice president of business development, said the phone companies offered the proposal to avoid a scenario that would harm the entire industry. That situation arose when the Bells and their competitors grappled over reciprocal compensation and failed to compromise, he said.
"Both sides are still fighting over something [reciprocal compensation] they both could have compromised. That isn't a life-threatening debate like this one is," Vinall said, referring to the UNE-P war.
About eXpeTel
eXpeTel Communications serves customers in the states
of Alabama, Florida, Georgia, Louisiana and Mississippi
and is growing rapidly throughout the BellSouth operating
territory. A full-service provider of telecommunications
products, eXpeTel offers an array of services, including
local and long-distance telephone services, Internet access,
and commercial voice and data services. More information
about eXpeTel Communications can be accessed on the Internet
at www.expetel.com.
About XFONE, Inc.
A U.S.-domiciled corporation, XFONE, Inc. is an international voice, video and data communications services provider with operations in the United Kingdom, the United States and Israel that offers a wide range of services, which include: local, long distance and international telephony services; prepaid and postpaid calling cards; cellular services; Internet services; messaging services (Email/Fax Broadcast, Email2Fax and Cyber-Number); and reselling opportunities. The Company serves customers worldwide. For the Company’s website, please visit: www.xfone.com
This press release contains forward-looking statements. The words or phrases "should," "would be," "will allow," "intends to," "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," or similar expressions are intended to identify "forward-looking statements." The Company's financial results reflected above should not be construed by any means as representative of the current or future value of its common stock. All information set forth in this press release, except historical and factual information, represents forward-looking statements. This includes all statements about the Company's plans, beliefs, estimates and expectations. These statements are based on current estimates and projections, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These risks and uncertainties include issues related to rapidly changing technology and evolving standards in the industries in which the Company and its subsidiaries operate; the ability to obtain sufficient funding to continue operations, maintain adequate cash flow, profitably exploit new business, and license and sign new agreements; the unpredictable nature of consumer preferences; and other factors set forth in the Company's most recently filed annual report and registration statement. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Readers should carefully review the risks and uncertainties described in other documents that the Company files from time to time with the U.S. Securities and Exchange Commission.
| For More Information,
Please Contact: |
| U.S. IR Contact |
Israel IR Contact |
Xfone Contact |
John Nesbett/Jennifer Belodeau
Institutional Marketing Services (IMS)
Phone: 1-203-972-9200
E-mail: jnesbett@institutionalms.com
|
Zvi Rabin
Kwan Communications
Tel: (Israel) +972 50 560 0140
E-mail: zvi@kwan.co.il |
Niv Krikov
Chief Financial Officer
Phone: + 972.39254446 (Israel)
E-mail: niv@xfone.com |
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