FCC Suspends Special Access Deregulation, Republicans Dissent

The Federal Communications Commission has temporarily suspended rules that allow incumbent phone companies like AT&T and Verizon to obtain pricing flexibility for special access services that big businesses, mobile phone providers and competitive carriers rely on to connect locations.

In an order released Wednesday, the FCC also said it would issue a mandatory request for data within 60 days so it could better assess the competitiveness of a market that is estimated to be valued at $12 billion to $18 billion per year.

"Based on the record and the undisputed finding that legacy regulations are not working as intended, we temporarily suspend outdated rules that not only allow incumbent carriers to raise prices in the absence of competition, but also deny them the flexibility to lower prices in the presence of competition," FCC Chairman Julius Genachowski said. "We do this as we determine what permanent rules would best promote a healthy competitive marketplace."

The decision to suspend the rules was not unanimous. The two Republicans at the commission, Robert McDowell and Ajit Pai, dissented.

The action by the majority, Pai declared, "will chill infrastructure investment, slow the deployment of next-generation networks, and impede job creation."

"We should be looking forward toward an all-IP world, not backward at legacy regulations developed during the fading era of copper," he said.

Maura Corbett, executive director of a coalition that represents competitive carriers who have griped over the deregulated rates that they pay incumbents like Verizon, praised the decision by the majority.

"The markets for high-capacity broadband lines on which businesses depend are dominated by only a few large telephone companies," said Corbett of the NoChokePoints coalition.

Verizon feels differently.

"There are many providers — cable companies and CLECs — that compete vigorously with special access," said Donna Epps, Verizon vice president for federal regulatory affairs. "Given this intense competition, any efforts to impose new pricing regulation are unjustified and will depress investment in these networks so critical to our economy."

For the last three years, the FCC’s wireline competition bureau has solicited voluntary data submissions in order to better understand the special access market. In spite of these requests, the FCC has acknowledged it has insufficient data.

FCC Commissioner Robert McDowell voiced concern that the temporary suspension could have long-lasting effects at an agency that has been slow to make decisions on special access.

In a footnote contained within its order, the FCC said it "will aim for final conclusions on the need for overall reform of the special access marketplace to occur in 2013." Final rules might not go into effect until the following year, and November’s presidential election creates more uncertainty since a win by Mitt Romney would shift power at the FCC to the GOP.

Some critics of the majority questioned why the commissioners suspended rules without first issuing a mandatory data request.

Still, at least one analyst — Christopher King of Stifel Nicolaus & Company, Inc.. — believes the action won’t have much impact in the near term because he is not aware of any pending or future petitions by the incumbents to request relief on pricing.

Earlier this year, AT&T and Windstream received pricing flexibility that allowed them to raise their prices on high-speed circuits in a few markets in California, Oklahoma, Nebraska and Texas. The FCC didn’t proactively grant the petitions; rather, they were granted by default under the agency’s rules.

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