Phone Companies See Different Special Access Markets
Incumbent phone companies portrayed a vibrant special access market in filings at the FCC Wednesday, while competitors said there’s been a “market failure” and the FCC should step in. The FCC asked for the comments to “refresh” a two-year-old proceeding to determine if it should make changes to the way it regulates special access (CD July 10 p1). Competitors have asked the FCC to put limits on the pricing flexibility program, which selectively deregulates Bell special access services as the companies show they have competition.
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Prices have fallen and competition grown since the FCC set up a market-based test for offering “high-capacity services” such as special access, Verizon said in comments filed at the commission Wednesday. There would be no justification for going back to price regulation, the company said. “The provision of high-capacity services including special access has evolved just as the Commission anticipated,” Verizon said. “Although companies looking for below-market rates have called for re-regulating special access services,” the FCC shouldn’t do so because “pricing flexibility is working,” said the U.S. Telecom Association. “Prices are down, investment is up and competition is robust,” USTelecom said. “Re- imposing price regulation on special access services would lack any economic support and would be bad regulatory policy.”
Not so, said Paetec Communications and US LEC in joint comments. The “national market failure in the wholesale special access marketplace” must be corrected, the competitive telecommunications companies said. Competitive carriers are facing “continuing monopoly price pressure” when purchasing special access from large incumbents such as the Bells, the filing said. Granting pricing flexibility “prematurely” has led to anticompetitive behavior,” Paetec and US LEC said.
Paetec and US LEC proposed “an alternative to a regulatory scheme” that would let incumbents opt out of special access regulation if they agreed to “best and final offer arbitration.” An incumbent would have to make an all-or-nothing choice: Either all of its special access services would be subject to regulation or all would be under arbitration.
The FCC is asking for so much information in this proceeding that it might as well be opening “an old- fashioned rate case,” said Randolph May, president of the Free State Foundation, a think tank. The FCC is asking what engineering models can be used to estimate costs, vendor prices for various network components used to supply special access and the amount of capacity competitors believe is necessary to justify building new facilities and other details, he said. “Producing such information is not cost-free,” said May.