FCC Chairman Moves Forward on Special Access

The Federal Communications Commission is moving forward on “special access” rulemaking that has been lingering at the agency for several years.

Julius Genachowski, the chairman of the FCC, reportedly has circulated an order to his colleagues that identifies steps to reform the special access rules. Special access refers to the high-speed circuits that landline telecommunications carriers, mobile-phone operators and American businesses purchase for a variety of reasons, such as to connect cell towers, carry data to the Internet and serve high-volume business customers.

“There is widespread agreement that the existing framework is broken, which is why we propose to temporarily suspend consideration of pricing flexibility petitions pending development of a new framework,” an FCC official said, according to a research note from Stifel Nicolaus. “The order offers a clear path to reform including a process to collect necessary data, which has thus far been insufficient. Our reforms will aim to protect competition; ensure access to robust, affordable broadband for small business, mobile providers, and others; and eliminate regulations where evidence of competition exists.”

The FCC’s pricing flexibility rules allow incumbent carriers such as AT&T, Verizon Communications and Windstream to provide special access services using more flexible tariffs that enable them to raise their prices. AT&T and Windstream have asked the FCC for relief in certain markets. For instance, AT&T early this year filed petitions asking for price flexibility in San Antonio, Texas and in the San Francisco/Oakland area. Verizon last month withdrew a petition to raise special access services by 6 percent, according to a coalition that opposed the measure.

“While we appreciate that the Federal Communications Commission is getting firm in its demand that those who are complaining about special access pricing support their criticism with evidence, we are concerned the commission’s freeze on further grants of pricing flexibility will inject uncertainty into an economic environment that requires predictability for long-term investment and job creation,” said Walter B. McCormick, Jr., president and CEO of USTelecom, an association whose members including large incumbent carriers.

A fundamental question U.S. regulators face is whether to reverse a course of deregulation in the special access market.

“Returning rates to just and reasonable levels will generate billions of dollars of savings across the broadband economy, will spur investment and jobs, improve wireless deployment and enhance rural broadband coverage at a time we need it most,” said the NoChokePoints Coalition, whose members include such competitive carriers as Cbeyond, Integra Telecom and tw telecom.

AT&T appears worried that the Democrat-controlled FCC is heading in a direction of imposing more regulations.

“The FCC has circulated an order that would undo more than 12 years of Clinton-era, deregulatory pricing policy on legacy non-packet services,” AT&T’s Bob Quinn wrote in a blog Tuesday morning.

Competitive carriers and related organizations argue, in part, incumbents have significant control over the special access market because their networks are connected to most buildings in America and industry consolidation has only exacerbated the situation.  

“Some competitors may argue that they can’t build more fiber to businesses. But the reality is many of them do exactly that,” wrote Quinn, AT&T’s senior vice president federal regulatory and chief privacy officer. “Level 3 says it has fiber within 500 feet of more than 100,000 “enterprise” office buildings … Cable companies have been aggressively competing for years by building out their own footprint.”

Christopher King of Stifel Nicolaus said it’s unclear whether the FCC will issue an order before January 2013. The commission will change leadership, he said, if Mitt Romney is elected President. With a Republican replacing Genachowski as chairman, the agency’s agenda and philosophy could change significantly.

“We believe President Obama’s possible re-election could facilitate measured FCC actions to further control some Bell special-access rates and practices,” King wrote.

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