AT&T-Windstream Fight Reflects Concerns Over Retirement of Legacy Networks

By Josh Long

As the nation’s largest local phone companies gear up to retire their legacy networks with flashy fiber and convert their transmission methods to Internet Protocol, competitive carriers that serve millions of American businesses are demanding last-mile access to the incumbents’ infrastructure, and other protections.

In a broad sense, the fight between legacy phone carriers and rivals that rent out a portion of the incumbent networks is one that has challenged regulators for many years since Congress opened up the local markets to competition through the 1996 Telecommunications Act: the extent to which telecom networks should be regulated based on the state of competition.

Windstream last year sought a ruling from the Federal Communications Commission that incumbents will have to offer to competitors DS1 and DS3 capacity loops on an unbundled basis even after the likes of AT&T and Verizon replace their copper networks with fiber and convert their transmission method from TDM to IP.

Windstream, the Little Rock, Arkansas-based Fortune 500 company, said in an FCC filing last month that it can continue to invest in its fiber network, the nation’s sixth largest, “but only if the Commission ensures that Windstream and other competitive providers, can economically serve small business consumers, who do not have sufficient purchasing power to make even a small last-mile network build economically feasible.”

Consumer groups, state government agencies, businesses, small incumbents and competitive carriers have expressed support for the petition, according to Windstream.

Incumbents have scoffed at Windstream’s request, citing for example an increasing demand in the market for higher-capacity services.

“In a gigabit world,” CenturyLink declared earlier this year in an FCC filing, “a 1.5 Mbps DS1 simply does not have sufficient capacity to meet the needs of most customers.”

The persistent squabbling over incumbents’ future duties after old networks are retired – and whether rates should be regulated rather than negotiated through commercial arrangements – has bled into myriad areas of the wholesale market, including the provision of so-called Ethernet services.

In an FCC filing Tuesday, AT&T objected to what it said was a recent request by Windstream to regulate Ethernet services as telecom carriers retire legacy TDM services.

AT&T cited an “intensely competitive” Ethernet market and pointed out that the FCC opted to forbear regulating the rates of Ethernet services several years ago. In order to reverse its decision, the Commission would need to start a new proceeding, the telecom giant argued.

“Because the Ethernet marketplace is extremely competitive,” AT&T declared, “the Commission does not remotely have a record that would allow it to conclude that …

… heavy-handed rate regulation has become necessary to protect consumers and the public interest.”

Such regulation, AT&T concluded, “would inevitably retard investment in broadband facilities.”

Earlier this month, FCC Chairman Tom Wheeler circulated a proposed order to his colleagues to protect consumers and foster competition as phone carriers retire their legacy copper networks. The FCC is slated to vote on the proposal during an Aug. 6 open meeting.

Among Wheeler’s ideas: Pending the completion of a special access proceeding, incumbent carriers would be required to offer competitors “rates, terms and conditions that are reasonably comparable to those of the legacy services,” according to an FCC fact sheet.

The FCC is considering a number of other proposals to promote competition amid the technology transition. The proposals include, among other things, a requirement that incumbents planning to retire a copper network provide notice of changes in conditions, terms and rates; and a demand that incumbents retiring a wholesale legacy service provide equivalent access on similar conditions, terms and rates.

It isn’t surprising that the incumbents have opposed the proposals since they are aiming to “exploit their market power over the last-mile inputs necessary to compete in the business broadband market,” according to Birch Communications, Integra Telecom and Level 3 Communications in a March 9, 2015 FCC filing.

But the United States Telecom Association (USTelecom) previously warned the Commission that unwarranted regulation of next-generation networks via unbundling requirements would stymie investment and impede competition.

“Having already determined over a decade ago that forgoing unbundled access mandates for next-generation networks and facilities would incent investment in the modern broadband networks that the country needs, and that such mandates would not be necessary to preserve competition and consumer choice, the FCC need not change course now,” USTelecom asserted in an FCC filing.