Gather Data Before Changing Special Access Framework, Providers Tell FCC
The FCC shouldn’t make any substantive changes to the special access pricing flexibility triggers until it gathers and analyzes competitive data, large telcos that sell such services have been telling commissioners in meetings this week. Those who buy special access have continued to express frustration at a system they say favors incumbents in areas where there’s no competition, allowing them to raise prices without fear of losing customers. A draft order that’s been circulating for over a week plans to seek data to reform the 1999 pricing flexibility rules, and FCC officials have said the existing special access framework is “broken” (CD June 5 p3).
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Verizon is concerned that any order addressing the current pricing flexibility framework “could prejudge the outcome of the Commission’s ongoing analysis of the marketplace before the Commission has collected the competitive data it needs to complete its review,” executives told an aide to Commissioner Robert McDowell Tuesday, according to an ex parte filing (http://xrl.us/bnboko). The telco also questioned the factual basis in the order for concluding that the existing framework is flawed, given that the commission has yet to collect all the necessary data for its analysis. Verizon urged the commission to refrain from taking any action that “could affect the substantive evaluation of the existing pricing flexibility framework."
USTelecom met with Commissioner Ajit Pai Monday to question the wisdom of a draft order that “appears to recommend substantive changes to the existing rules in the absence of any evidence of changed circumstances,” it said. The draft is “in spite of the Commission’s own acknowledgement that competitive providers’ refusal to voluntarily submit data supporting their claims has been a primary obstacle to its evaluation of this issue,” the association’s ex parte filing said (http://xrl.us/bnboma). “It would be inconsistent with principles of data-driven analysis for the Commission to change the rules mid-stream despite an acknowledged absence of data to support such change."
The order suspends any further grants of price flexibility until the commission takes action on special access either way. “I consider that to be a substantive change,” USTelecom Vice President Glenn Reynolds told us. Reynolds took issue with the FCC’s claim that the special access is “broken.” It’s not broken, he said, explaining that the 1999 order adopting the triggers identified a necessary trade-off “between granularity and administerability.” The commission’s balancing test actually makes it “quite difficult” to get pricing flexibility, he said.
The current pricing flexibility triggers “have never measured last-mile competition effectively,” Sprint Nextel told a Pai adviser Monday, according to an ex parte filing (http://xrl.us/bnbooa). Sprint said suspending any new grants of pricing flexibility until the commission establishes a “new, more effective framework for evaluating competition” for channel termination services would be “a positive first step toward special access reform.” Incumbent LECs dominate the marketplace for DS-1 and DS-3 services, Sprint said. ILECs have “taken advantage of pricing flexibility to raise their rates for those services, without any apparent concern that their unilateral price increase would cause the incumbent LECs to lose customers to competitors,” the carrier said. Sprint said the commission has already assembled an extensive record demonstrating lack of competition in the special access market.
Level 3 posted a blog entry responding to AT&T’s accusation that it was sitting on the “sidelines” instead of building out fiber (CD June 12 p3). “We would love to construct fiber to many more buildings adjacent to our network, but AT&T’s (and the other incumbents') lock up arrangements prevent it,” Michael Mooney, Level 3’s general counsel-regulatory policy, wrote Tuesday. He argued Level 3 wouldn’t be able to recover the cost of investment for fiber build-out to nearby buildings, because its prospective customers would already be locked in to contracts from AT&T and other incumbents. “The Commission should immediately abolish price-cap LEC behavior that eliminates potential demand for competitively supplied special access in large portions of the market because that behavior impedes investment in and deployment of facilities-based competitive networks,” Level 3 wrote. “AT&T could help us get off the sidelines by agreeing to eliminate its use of demand lock up arrangements. Until they do or the FCC stops them we are stuck on the bench far more often than we would like.”