The FCC should approve a Windstream petition to ensure ILEC DS1 and DS3 loops are available to competitors as discounted unbundled network elements (UNEs) even if fiber replaces copper (see 1603150065), CCMI consultant Andrew Regitsky said in a blog post Friday. Clearer DS1 and DS3 UNE rights would not only give Windstream and other CLECs lower wholesale prices in some cases but also more leverage in broader special access negotiations, Regitsky told us by phone (DS1s and DS3s provide traditional special access service). The FCC so far "has chosen to sit on" the Windstream petition," Regitsky's blog post said, despite a recent Further NPRM to revamp the special access framework for business data service, or BDS (see 1604280057 and 1605030001). "The agency is currently in the process of developing new regulations for the [BDS] market, including the classification of markets into competitive or non-competitive to create new rules for special access and Ethernet services," he wrote. "But how can it determine if a market is competitive if the market participants have no idea what service alternatives are available? It is high time for the Commission to act on this issue and end the continued uncertainty for both ILECs and CLECs." CLECs generally supported the FCC's regulatory course in the FNPRM while most large ILECs were critical. Although Regitsky previously worked for CLEC trade group Comptel (now Incompas), he recently slammed FCC BDS proposals as "Bizarro world" regulation (see 1605060057).
The FCC sought comment by May 26 on discontinuance applications filed by AT&T, Cardinal Broadband and Level 3. The applications seek to discontinue, reduce or impair domestic telecom services and/or interconnected VoIP service, said a Wireline Bureau public notice Wednesday in dockets 16-151, 16-152 and 16-153.
AT&T and the National Exchange Carriers Association took issue with a Sandwich Isles Communications (SIC) restructuring plan to reduce the amount of disputed cost recovery it needs from a NECA pooling mechanism to pay for its Paniolo undersea cable network in the Hawaii Islands (see 1604290035). "SIC claims that it has somehow restructured the Paniolo lease and that as a reward it now should be allowed 100% recovery of these restructured lease payments. SIC’s post-hoc justifications should be rejected," AT&T said in its reply comments in an FCC proceeding in docket 09-133 to refresh the record. NECA also wasn't convinced by Sandwich Isles' recent plan. "SIC’s proposal is unclear, has not actually been implemented, and does not take into account the substantial additional costs associated with the Paniolo cable system that are part of the 'lease expenses subject to dispute,'" the group said in its reply. "Even the proposed revised lease cost of $8.1 million for the Paniolo cable system is unsupported either as to cost or demand. SIC’s alleged 'comparable' cost analysis is not submitted for evaluation. SIC has failed to meet its burden of justifying its inclusion of the lease expenses in its revenue requirements. Therefore, NECA’s conclusion that the Paniolo cable system lease cost is not used and useful is still valid, even at the lower level." The FCC should resolve the open issues based on "existing and verifiable facts," NECA said. In its reply, SIC said NECA's previous funding resistance is "now moot" due to its recent proposal. "The refinancing proposal SIC has advanced in its Initial Comments -- a proposal that NECA has publicly stated, although not on the record in this docket -- that it will 'consider' is a complete response to the set of issues that NECA has raised," Sandwich Isles said. "Given NECA’s record of unwillingness to accept a valid Bureau Order specifying the level of recovery, we are constrained to answer the NECA arguments on their own terms. We submit that the position it has taken is wholly without foundation, with respect to both the facts and legal analysis."
Frontier Florida is now the complainant against Florida Power & Light in a pole attachment dispute (see 1603140049), the FCC Enforcement Bureau confirmed in a letter posted Tuesday in docket 15-73. Frontier Florida took over from Verizon Florida after Verizon Communications completed its sale of wireless systems in Florida and two other states to Frontier Communications.
The FCC Enforcement Bureau reached a consent decree with inContact to resolve an investigation into whether the company failed to complete long-distance calls to a consumer in rural Minnesota. "Rural call completion problems have significant and immediate public interest ramifications," said the Monday bureau order. "To settle this matter, inContact admits that it failed to ensure that its intermediate providers were performing adequately in delivering service to the rural consumer and that it failed to cooperate with the Commission’s investigation of this problem. [I]nContact will implement a compliance plan to prevent recurrence of these violations and will pay a $100,000 civil penalty."
The FCC teed up an application from Mix Networks to obtain phone numbers directly from numbering administrators under the commission's new rules for interconnected VoIP providers, which took effect in February (see 1602050021). Comments on the Mix application are due May 20, said a public notice in docket 16-108 listed in Friday's Daily Digest. The Wireline Bureau recently approved a Vonage VoIP application for phone numbers (see 1603310050).
The FCC special access push creates "potential headwinds" for some telcos, said Wells Fargo analyst Jennifer Fritzsche, citing the proceeding as one reason for her downgrade of CenturyLink to "market perform" this week. She said CenturyLink "could see an impact (+$2B access revenue)" from possible FCC regulatory changes, given the "very high margin" in the last-mile portion of special access (business data service). "If the FCC sides with the likes of [Level 3], Sprint, and now [Verizon], it is hard not to see this revenue and margin facing a bit of a squeeze," she wrote in a note Tuesday. Updating her views Wednesday after the company's earnings call, Fritzsche said management acknowledged special access is "high margin" with little to no maintenance costs. "While we acknowledge there are still many unknowns here, there is no doubt this is becoming a part of the regulatory focus for investors and could serve as a near term overhang on those names with special access revenue exposure," she wrote, calling CenturyLink's earnings (here) "in line" with expectations accompanied by "solid" free cash flow generation, but with "cautious" 2016 guidance. Cincinnati Bell (here), Cogent Communications (here), Consolidated Communications (here), FairPoint Communications (here), Frontier Communications (here) and Windstream (here) also reported quarterly earnings this week.
The FCC Enforcement Bureau denied EarthLink's claims in a complaint it filed against SBC Communications and SBC Advanced Solutions Inc. (SBC-ASI). "The Complaint alleges that SBC and SBC-ASI illegally subsidized their retail Internet access service with profits earned from the sale of their wholesale asynchronous digital subscriber line (ADSL) transport service in violation of Sections 201(b) and 202(a) of the [Communications] Act, Section 64.901 of the Commission’s rules, and the Commission’s Computer III requirements," said the order issued Wednesday in docket 14-207. The bureau found EarthLink's claims were "without merit" for various reasons it explained in the order.
Scores of rural telcos challenged FCC data that indicated competitors provide qualified broadband/voice service in certain census blocks, while some cable companies updated data on their rival offerings. Certain levels of unsubsidized competitive service in an area render the RLECs ineligible for high-cost support under the commission's new optional model-based rate-of-return USF mechanism (see 1603300065). In a filing in docket 10-90, TDS Telecommunications, a large rural telco, challenged Clearnetworx's Form 477 submission that indicates it serves 62 census blocks in the territory of TDS subsidiary Delta County Tele-Comm. "Clearnetworx's own coverage map and statements from its customer service representative ... reveals that they do not offer voice or broadband service in those census blocks. Given there are no other unsubsidized competitors offering the required service, these census blocks should be treated as unserved by an unsubsidized competitor" and thus eligible for model-based Connect America Fund support, TDS said. Some of the other RLECs submitted statements from competitors confirming they didn't provide qualified service in census blocks listed as served under the cost model. But updating its data, Time Warner Cable said it was providing qualified broadband service for the first time in about 9,564 census blocks. "Because these census blocks are 'served' by TWC, rate of return carriers should not be eligible to receive model-based support in those blocks," it said. Cox Communications said it identified an additional 1,048 census blocks with competitive coverage. Co-Mo Comm submitted a list of 847 census blocks where it was deploying fiber-based broadband service. The competitor said it "has reason to believe that some or all" of the census blocks are in rate-of-return study areas in the latest cost model, and should be removed from CAF eligibility. Thursday was the filing deadline for filing challenges or updates.
Level 3 Q1 free cash flow rose to $213 million, from $42 million in the year-ago quarter, as revenue and net income were relatively stable, the company said Wednesday. Total revenue rose about 1 percent to $2.05 billion, excluding results from a deconsolidated Venezuelan subsidiary's operations. Net income rose about 1.6 percent to $124 million. Guidance for expected 2016 adjusted EBITDA was slightly raised from 9-12 percent growth to 10-12 percent growth year over year. "Level 3's first quarter results demonstrate the benefit of our emphasis on profitable growth, as evident in our expanding margins and strong Free Cash Flow during the quarter," CEO Jeff Storey said in an earnings release.