NoChokePoints Wants FCC to Take Control of Special Access Market
Members of the NoChokePoints Coalition used the pending termination of price controls on AT&T’s special access lines to urge the FCC to move ahead with its special access proceeding. The telco agreed to price controls when it acquired BellSouth. They no longer apply as of Thursday. Those who purchase special access from AT&T describe the rates the company charges -- and the new rates it will charge once it’s out of its agreement -- as exorbitant. AT&T has described the current rates as “temporary rate reductions” and said Tuesday any increases would be returns to normal rates.
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This issue affects all U.S. consumers, the coalition said. “It hits even those who've never heard of special access,” said Gigi Sohn, president of Public Knowledge. AT&T and Verizon, which combined control most of the special access lines, can change their prices “completely unrestrained by competition,” she said. Those price increases are then passed on to the consumer, she said: They're passed to customers of T-Mobile and Sprint, to students at universities offering distance learning, to patients whose hospitals offer electronic health records. Colleen Boothby, executive director of the Ad Hoc Coalition, which includes manufacturers, retailers, financial services and others, said special access “is the nervous system for the nation’s economy.” It’s how banks, airlines and others connect, she said.
Verizon said there is “vibrant competition” and prices have decreased. A spokesman said prices paid for Verizon DS1 and DS3 decreased by 24 percent between 2002 and 2008. The FCC needs to do a good analysis of the marketplace before it can make any decisions, he said. “The FCC has chosen a reasonable approach to evaluate its current rules, and it should resist the pressure from NoChokePoints to short-circuit the process and prejudge the outcome."
The coalition said AT&T feels free to raise its prices -- even to advertise three years in advance that it would do so -- because it has no competition. AT&T has pointed to a FiberTower SEC filing. FiberTower said it operated in a “highly competitive environment” and its rates wouldn’t look as good if the incumbent local exchange carriers -- like AT&T -- were forced to reduce theirs. The appearance of such competition can be deceiving, said Sprint Nextel. “Alternatives are sparse at best,” said Paul Schieber, vice president of access and roaming. A spokesman said only 4 percent of Sprint’s cell towers are physically close enough to an alternative special access provider to truly give it a choice in who it uses. AT&T’s increases will cost Sprint tens of millions of dollars a year, Schieber said.
AT&T scoffed at the coalition’s arguments, saying members were focused on last-generation technology instead of next-generation technology. “Why aren’t the companies that are complaining about our special access prices instead focused on getting their own fiber into buildings they want to serve? Instead of talking about DS1s they could be investing in far more capable technology,” Frank Simone, assistant vice president of federal regulatory, said in a post to the company’s blog late Tuesday. If the government controls last-generation technology prices, no one will invest in next-generation technology, he said.
Others had a harder time quantifying exactly how much the rate increases would be. Boothby said it would depend on the particular customer and their needs. Some members of her group have estimated increases of 1 to 2 percent, while others have estimated 7 to 8 percent increases, she said. “That’s a real big number right now in this economy,” she said. Members of the coalition want the FCC to move forward. The commission has put out a request seeking feedback on how to approach the question and will hold a workshop this summer. The NoChokePoints Coalition emphasized that the FCC can move forward now. Unlike other issues where its authority has been questioned, no one questions that the agency has the authority to act here, Sohn said.
Two ex parte filings submitted Monday dealt with special access. Sprint wrote that AT&T is raising its rates simply because it can, not because it’s offering better service or sees more demand. The commission should take interim steps, like rollback of phase 2 price flex rates to price cap rates, imposition of a special access rate freeze or a moratorium on new pricing flexibility, until it crafts “comprehensive reform,” Sprint said. Representatives of tw telecom met with the FCC to discuss Ethernet special access service. That company said the commission should require the incumbents to charge the same prices in areas that have pricing flexibility as are charged in price cap areas.