Special Access Revisited

Next to forbearance, many wireless providers and CLECs list special access as their top regulatory concern. How, they ask, will they compete if the FCC continues to reduce government oversight of circuit pricing and accessibility? Now, at the behest of a head House Democrat, not of its own accord, the FCC looks to ask itself that question (although, probably, on a slower timeline than lawmakers might like). Ed Markey, D-Mass., has called for a review by Sept. 15, but industry insiders doubt the FCC would act that quickly.

Markey, chairman of the House Subcommittee on Telecommunications and the Internet, earlier this year told the FCC he was worried about anti-competitive special access prices, including effects on wireless carriers as the 700MHz auction approaches.

My concern is that significant concentration in the special access market through mergers and bankruptcies, combined with the commissions deregulatory pricing regime, has resulted in higher prices and little competitive choice for special access connections, Markey wrote in a letter.

FCC Chairman Kevin Martin responded by saying he saw no need to change pricing rules. However, he agreed to ask the industry to refresh the two-year-old docket on special access. He said the timing was warranted since technologies, such as VoIP and wireless broadband, have redefined telecom since 2005 when special access last was a major industry issue. Other factors included Bell mergers and the recent release of a General Accounting Office report on competition and special access (see sidebar). Months of lobbying on the part of Sprint and T-Mobile also influenced Markeys decision to approach Martin, sources say.

The competitive industry is formulating its collective strategy for addressing the pricing matter, but some providers were able to go on the record.

Sprint and T-Mobiles lead regulatory staffs didnt return requests for interviews; however, a Sprint spokesman said in an e-mailed statement that the provider is confident the record-refresh will show the critical need to impose pricing discipline on the monopoly special access market, particularly as carriers seek to provide competitive broadband services.

Industry insiders speaking on background say special access prices are crucial, particularly for wireless carriers, because of the costs they pay for backhaul to their cell towers.

Meanwhile CLECs, such as XO Communications and PAETEC Communications Inc., say its important for the feds to re-examine special access policies because deregulation has not led to more competition.

Pricing flexibility has not worked, says Lisa Youngers, director of federal regulatory affairs at XO. The competition that the FCC predicted would develop has not materialized, and prices and terms and conditions on special access discount offers all need to be reformed.

Another source familiar with the proceedings who would only speak on background agrees, saying the Bells have used deregulation as an opportunity to wring money out of competitors. When they sign with RBOCs, competitors must guarantee that a very high percentage of their business will run on Bell networks, the source says.

The Bells dont make it easy to get access to the dedicated circuits, the source adds.

RBOCs also exclude other special access providers from some markets, which prolongs the monopoly, says Todd Murphy, senior carrier relations manager for PAETEC. He says the provider would support change in the form of a commercial arbitration condition that is similar to traditional commercial negotiations between parties with equal bargaining power. This would reduce the chances of an ILEC using its monopolistic market power to deny or delay special-access services sold to competitors, he says.

Global Crossing is pushing for the same thing. Arbitration, says Paul Kouroupas, vice president of regulatory affairs, would accomplish several goals: it would relieve the FCC from having to mediate intercarrier contract disputes; it would remedy the increased access pricing market power that has resulted from mergers and bankruptcies; and it would spur the deployment of advanced broadband infrastructure.

The last point, Kouroupas says, would be realized because the market moves faster than government when commercial arbitration is in place. Companies, further, would spend less money on dispute resolution, which some parties estimate is greater than what carriers spend on research and development.

AT&T Inc., for its part, says the data on the special access market remain incomplete and inaccurate. It is unfair to quantify the state of pricing without also accounting for competitors facilities and services, AT&T spokesman Michael Balmoris says. Only after receiving and analyzing data that provides a complete picture of what is happening in this market can the FCC make any judgment about its competitiveness, says Balmoris.

Verizon Communications Inc. didnt respond to a request for comment by deadline.

The FCC has not unveiled a timeline for considering the subject, despite Markeys call for a Sept. 15 drop-dead date.

GAO Reports on FCC

The U.S. Government Accountability Office (GAO) last November released a lengthy report finding that the FCC needs a better way to measure competition in commercial markets. In the report, FCC Needs to Improve Its Ability to Monitor and Determine the Extent of Competition in Dedicated Access Service, government researchers said facilities-based competitive alternatives for dedicated access arent widely available in 16 major metro areas.

The authors attributed limited competitive build out in those footprints partly to incumbent pricing. They also said in areas where competitors can lease unbundled network elements from incumbent providers, there may be less incentive for competitors to invest in their own facilities

Go to to read the full report.

AT&T Inc.
Global Crossing
PAETEC Communications Inc.
Sprint Nextel
T-Mobile USA Inc.
XO Communications

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