Today's Communications Daily [subscription required] reports that, in separate decisions, a California ALJ and PUC Commissioner Carl Wood have recommended UNE-P rate increases of $2.97 (21.3%) and $3.45 (24.8%), respectively. Any potential increase would be above and beyond interim rates of $13.93, which were established in May 2002, and subject to a true-up to that date. (For retail rate dereg junkies, the state has mandated a local residential retail rate of $10.69.)

Although these are only recommended decisions, this is a clear signal that UNE rates are trending significantly upwards nationally. Just look at Commissioner Wood's web page, where he is anointed "The Consumers' Commissioner." Or look to Indiana, where a similar rate increase has already been approved; or Ohio, where a significant interim rate increase is currently in place (with the possibility of additional, permanent upward adjustments). Michigan, Illinois and New York are among other states who are also currently reconsidering their UNE rates.

Leaving the issue of mandated filings aside, the upward trend in UNE rates could have two immediate impacts on the "negotiate not litigate" process. First, CLECs may increasingly feel the pressure to seek certainty through commercial agreements, rather than relying on a now-unfriendly state ratemaking process. Second, it could have an impact on the baseline of offered terms during negotiations. Recall AT&T's "roadmap to facilities-based competition" from last week. In its term sheet, AT&T proposed a $3 UNE-P rate increase for customers (with four lines or less) to be effective in 2007. This is an amount comparable to the recommended increase in the California decisions, which would be applied retroactively to 2002, no less.

Per usual, AT&T released a strongly worded statement berating the recommended decisions, noting they "will kill the future of facilities-based competition." Odd, considering how just last week the company offered to agree to UNE-P rate increases in order to "foster a genuine migration from competition based on UNE-P to facilities-based competition."