Verizon, CLECs Strike Deal on Special Access

Say compromise is not perfect, but a way forward
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The FCC had barely fired the starting gun for both sides in the special access data race, but there was already talk of a negotiated finish.

Incumbent telco Verizon and INCOMPAS, which represents competitive carriers, signaled they had struck a compromise on how the FCC should proceed in an IP world, which would include technology-neutral rate regulations on everyone, including cable and competitive carriers, where there is insufficient competition.

Verizon was even joining in a call for the imposition of Title II, in this case for all providers offering dedicated service.

Special access is the business broadband service that incumbent telcos (ILECS) dominated because they had built out the networks. The FCC requires ILECS to lease those lines (unbundle) to those competitive telcos (CLECs) and cable companies at reasonable rates.

"In an effort to move beyond a more than decade-long debate [over whether and how to extend those legacy regs to an IP world], INCOMPAS and Verizon sent a letter to the FCC today that recommends adopting a permanent policy framework for all dedicated services, including Ethernet services," said INCOMPAS CEO Chip Pickering and Kathleen Grillo, SVP and deputy general counsel, public policy and government affairs, for Verizon, in a blog post.

They said the framework was legally sustainable and recognized changes in the marketplace in the decade the debate has been raging.

AT&T had no comment, but a source said the company was still digesting the proposal at press time, which appeared to be more targeted to cable than CLECs.

From the National Cable & Telecommunications Association's response, cable ops were feeling targeted as well.

“The ‘principles’ suggested by Verizon — INCOMPAS seem at odds with sound economics and a policy of promoting market-driven, facilities-based competition," NCTA said. "Cable operators are new entrants in the business services market, and are investing heavily in building their own facilities to serve business customers.  They are providing precisely the type of facilities-based competition that the Chairman has praised.  The FCC should reject any call to impose new, onerous regulations on an industry that is stepping up to offer meaningful choices to business customers.  The FCC will not achieve competition if it burdens new facilities-based entrants with regulation.”

"Sprint is pleased that Verizon and INCOMPAS are calling for a new regulatory framework to address the decades old issue of special access reform," the company said in response to the announced compromise. "Sprint has argued for many years that the current market for dedicated broadband circuits, a.k.a. special access, is broken.  Indeed, data that the FCC just allowed to become public demonstrates that 73% of these locations are served by a monopoly and a staggering 97% have a duopoly at best. Establishing a forward-looking, sustainable framework to address these non-competitive markets is critical to the future of broadband services in the United States.

Verizon and INCOMPAS outlined the framework thusly:

"The FCC should promptly adopt a permanent framework for regulating all dedicated services in a technology neutral manner. All providers offering the same or similar services should be subject to the same overall regulatory framework. That includes not only incumbent providers, but also cable companies and other wireline competitive providers that now compete in this marketplace.

"In the near term, the FCC should make clear that all providers offering dedicated services are subject to Title II of the Communications Act, including Sections 201 and 202 of the Communications Act. Subject to such a clarification, Verizon would not oppose an order placing Verizon on the same footing today with regard to Ethernet services as cable companies, competitive providers and other incumbent LECs that have received forbearance relief from dominant carrier regulation and is adopted at the same time as an order adopting a permanent framework.

"The FCC should seek comment on a permanent framework that moves away from the current dominant/non-dominant regulatory structure for these services and adopts a new regulatory model.

"That new model would rely on ex ante rate regulation in relevant markets with insufficient competition. Under the new model, in relevant markets that are insufficiently competitive, price regulation is warranted on a technology-neutral basis. The FCC would apply rate regulation to constrain prices and ensure that providers could not abuse their market positions by imposing rates, terms or conditions that are unjust or unreasonable, or unjustly or unreasonably discriminatory.

"In relevant markets where there is sufficient competition, the FCC would not need to apply ex ante rate regulation but would instead rely primarily on market forces to discipline prices and ensure a dynamic marketplace. Providers offering dedicated services in these sufficiently competitive relevant markets would still be subject to Title II, including Sections 201 and 202 of the Communications Act.

"This new model would encompass all dedicated services (e.g., TDM special access services and packet-based services such as Ethernet) provided by all competing providers.

"There should be a relationship between wholesale and retail pricing for these services, which the new model should reflect."

But not everyone was in a kumbaya mode.

That compromise announcement came just a day after the FCC signaled how stakeholders like Verizon and INCOMPAS could share a bunch of data the FCC has been collecting in its special access review.

The FCC reminded participants back in January that it considered any massaging they had done of the highly confidential data as part of its data collection to be confidential and not to be made public unless the FCC has said so.

Both the incumbent carriers (the ones with most of the busienss lines) and competitive carriers (the ones who get special access to them at reasonable rates) asked the FCC to allow public disclosure of some of the data derived the confidential info.

The FCC Wireline Bureau Wednesday (April 7) released a public notice outlining what info could be shared, which was aggregated info and figures by provider or type of service, ILEC (incumbent telcos--AT&T, Verizon, etc) CLECs (competitive phone companies) or cable companies.

For example, a stakeholder could release its analysis that 33% of a certain area is served by ILECs, 33% by CLECS, and 33% by phone companies, which was the FCC's own no-favorites example.

But the data must be aggregate and anonymized.

Hardly had the notice been issues than critics of the ILECs released data suggesting ILECS were still dominant as monopolies and duopolies, while USTelecom, whose members include AT&T and Verizon, released data it opined showed CLECs were not investing in broadband nets, instead calling for more regulation, which USTelecom called a business decision, not a market failure. 

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