Industry observers are split over whether the unbundling rules the Federal Communications Commission issued Thursday favor incumbent local exchange carriers or their competitors.

While early interpretation viewed the decision as a blow to the ILECs, driving stock prices down, some see it as a win.

“The [regional Bell operating companies] will say they’re not happy because the state regulators will have a role” determining how some of the rules are applied, says Tom Nolle, president of telecom consultancy CIMI. “But realistically they come out of this with the key issue, which is basically universal exemption of new broadband infrastructure from unbundling.”

The momentous decision, one of the most heavily lobbied telecom issues in recent memory, deals with what network elements — broadband facilities, lines and switches — the ILECs have to make available to competitors on a so-called unbundled basis. It further spells out what role states will play in dictating what will be unbundled.

On the national broadband front, the FCC ruled that the ILECs will not have to share new fiber facilities to residential areas or businesses. The ILECs have long complained that the requirement to share new facilities served as a disincentive to build out new plant.

Observers believe this ruling could encourage the ILECs to start investing. But others say there’s no guarantee that will happen, in part because the ILECs might have to get state approval before moving broadband customers from copper networks to fiber.

“The bottom line is this day was supposed to be a day of clarity, with the gun for investment in the broadband market finally going off,” says Matthew Davis, an analyst with The Yankee Group. “But with this decision, the gun’s still pointing up in the air unfired.”

Also on the broadband front, the commission elected to phase out line-sharing over the next three years, a blow to competitive DSL providers such as Covad Communications.

Line-sharing lowers costs for DSL carriers by enabling them to provide service over the same copper loops the ILECs use to provide voice service, rather than having to lease separate loops from the LECs at higher prices.