Special Access Foes Fight Over Analytical Framework
Fanning the debate between incumbent local exchange carriers and competitive local exchange carriers in reply comments to the FCC on revamping the special access regime, CLECs said the current pricing framework has thwarted the commission’s goal of allowing competition to flourish. “The fact that the rates charged by ILECs in areas subject to pricing flexibility are often higher than the price cap regulated rates offers compelling evidence of the shortcomings of the existing framework,” Level 3 said. Sprint Nextel said “the incumbent LECs’ ability to exploit their market power has created well-documented harms to purchasers of special access service and, thus, to the U.S. economy as a whole.” ISPs and wireless carriers like Sprint and T-Mobile are asking the commission to adopt an analytical framework to help judge the situation. The FCC is responsible for doing a reliable market-power analysis based on facts, TW Telecom said. The commission should reject the ILECs’ suggestion to rely on anecdotal information, because that can’t “provide a reliable basis for evaluating the competitive conditions in the market,” it said. By studying incumbent carriers’ prices and costs for rack rate special access circuits and term contracts, as well as prices from competitive carriers, the commission can capture “both current and future market activity by all providers of these services using all technologies,” XO Communications said. “It thus fulfills AT&T’s call for a ‘fact-based and data-driven’ inquiry.” Supporters of re-regulation seek to turn the proceeding away from “transparent examination of the relevant competitive data,” because “it’s clear that pricing flexibility rules are serving their purpose,” AT&T said. They have had about a decade to provide evidence to support their claim, “yet they have adamantly refused to do so, even as the ILECs produced reams of data showing these claims to be without merit,” it said.
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The FCC’s analytical framework should adopt broad product and geographic market definitions and shouldn’t “attempt to evaluate competition by using arbitrary benchmarks of prices, costs or profits,” Verizon and Verizon Wireless said. They said there’s “ample evidence” of recent competitive entry and planned future entry. The 25 largest metros in Verizon’s service territory for special access demand had “nine known competitive fiber providers” on average in 2007, they said. Verizon’s claim that declining prices and increasing output alone demonstrate that no market failure has occurred is an overstatement, XO said: “The record is replete with expert declarations that the key determinant of market power is profit margins. XO is confident the Commission understands the value of this approach and that an examination of price alone is insufficient.” Adopting further special access regulation would be a mistake for the FCC, the Free State Foundation said. It said calls for “interim regulatory measures to freeze, limit or roll back prior deregulatory decision” or “new processes to allow customers to petition the Commission to revisit prior grants of pricing flexibility to carriers,” should be rejected. The fixed wireless, cable and fiber markets add to the list of competitive alternatives, USTelecom said. Cable providers are “growing their volume of high capacity services,” fixed wireless providers, like Towerstream and FiberTower have generated significant revenue growth in their most recent quarters, and competitive wireline providers like TW Telecom and Level3 “continue to invest capital and connect more customers directly to their networks,” it said.