CenturyLink, Frontier, FairPoint Fight Verizon Proposal for Special-Access Reform

CenturyLink and two other telcos are calling Verizon and Incompas’ proposal for the business data services (BDS) or “special access” market misguided and flawed.

This spring, the FCC proposed a new “technology-neutral framework” to regulate the market for BDS. Under that, the FCC would classify a market as either competitive, in which service providers would be subject to little oversight, or noncompetitive. In a noncompetitive market, providers would be subject to “one set of tailored rules” that would include “the use of price regulation and the prohibition of certain tying arrangement that harm competition,” according to the FCC’s May 2 further notice of proposed rulemaking (FNPRM).

Earlier this month, Verizon and Incompas submitted a proposal that includes price reductions and a competitive market test for the FCC to consider as it analyzes the market.

In its filing, CenturyLink, Frontier Communications and FairPoint Communications said claims by regulatory proponents that BDS rates are too high ignore “record evidence of intense BDS competition and rapidly falling prices – competitive realities that are confirmed by the initial comments filed by many of the midsize ILECs’ competitors.”{ad}

“Far from offering a middle ground that accounts for the viewpoints of all stakeholders, the CLEC-oriented framework proposed at the eleventh hour by Verizon and Incompas reflects the mutual worldview of entities whose business interests have recently come into alignment,” the filing reads. “In short, after restructuring its business model by shedding ILEC exchanges it no longer wants – exchanges several of the midsize ILECs stepped up to serve – and moving to acquire one of the largest CLECs (XO Communications), Verizon has become a large-scale purchaser (and perhaps even a net purchaser) of out-of-region BDS. The fact that CLECs (and only CLECs) immediately lined up behind the proposal shows that this framework is no compromise.”

The commission should not regulate rates for service packages involving both “competitive” and “noncompetitive” markets, the telcos said.

“Because multi-location BDS customers are highly valued, sophisticated entities that enjoy significant bargaining power, and because rivalry in ‘competitive’ areas will discipline rates for multi-location service packages, there is no basis for the commission to adopt its ‘geographic tying’ ban or to apply price caps to bundled service packages,” it said. “Instead, the commission should clarify that freely negotiated BDS service packages that include areas deemed to be ‘competitive’ and ‘noncompetitive’ are outside the scope of price cap regulation.”

The Commission should take full account of all sources of BDS competition and reject proposals for expansive regulation of DSN and higher-capacity facilities such as Ethernet and other packet-based services, the filing said.

“The Commission should genuinely adhere to the principles espoused in the FNPRM and adopt a framework that relies on competition as much as possible, is technology neutral, removes barriers and looks forward to tomorrow’s marketplace, while still being administratively feasible,” it said.