Special Access, Take Two

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On Aug. 23, the Federal Communications approved
Verizon Wireless’ purchase of Advanced
Wireless Spectrum bandwidth from the SpectrumCo
consortium of cable companies. Some
of the parties opposing the deal (among them,
some regional wireless companies) claimed
that post-approval, Verizon, which also owns
landline networks, would increase the price for
backhaul transport services (that is, “special access”)
to make it harder for companies to compete
with Verizon in providing wireless services
to end users.

In the order, the FCC found that “given the large and growing
nature of the backhaul services market and the evidence
that cable companies are both well-positioned to compete
in that market and increasingly successful when they do
so,” regional wireless companies are, and will still be, able to
get cheap special access services to connect their antennas
to their switching centers. More generally, the FCC found
that facilities-based competition between incumbent localexchange
carriers, competitive local-exchange carriers, the
incumbent cable company, and the overlay cable company
(where present) can be relied upon to deliver cheap wholesale
capacity services to companies that need it.

Although the FCC had released, just the day
before (Aug. 22), a special access order that suspended
grants of pricing flexibility for special access
services to ILECs, it seems that after a day of
reflection, the FCC realized it had failed to recognize
that facilities-based competition is alive and
well in the special access service market, which is
rapidly transitioning to a competitive fiber/Ethernet-
based marketplace. In the end, it is likely the
data collection as part of the FCC’s special access
proceeding will show that the FCC’s finding in
the Verizon/SpectrumCo order is correct and should be incorporated
into the Commission’s decision-making process
as it proceeds with special access. Imposing new regulations
in a market where the FCC’s evidence suggests the presence
of competitors that are “well-positioned” and “increasingly
successful” constitutes a failure to provide the kind of foundation
that will foster investment in this market.

Leslie Marx is an economics professor at Duke University’s
Fuqua School of Business and a former FCC
chief economist.

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