ILECs Urge ‘Simple’ Triggers in Special Access Market Analysis

AT&T argued against the “multifaceted” panel regression analyses proposed by the FCC (CD Dec 13 p5), saying it would be “entirely unnecessary” and raise a host of methodological and econometric difficulties “that may prove insurmountable” (http://bit.ly/ZIOerK). The carrier strongly rejected a proposal raised by several CLECs to undertake a “traditional” market power inquiry that would have the commission assess market share, demand and supply elasticity, and other factors, for every customer location in the country. The CLECs’ “flawed market analysis proposals appear simply to be stalking horses for their real objective -- the immediate and massive reformation of virtually all special access tariffs and negotiated special access contracts to eliminate commitments those carriers made in exchange for discounts and other benefits,” AT&T said.

Instead of detailed market analysis proposals, AT&T suggested the commission simply use the data it collects to assess “to what extent the collocation-based triggers have been reasonably accurate proxies for the presence of sunk competitive facilities that permit competitors to bid for and win special access business.” AT&T disputed claims by competing carriers that the terms and conditions of its special access tariffs foreclose competition in the special access market, and questioned the legality of proposals that the commission alter the terms of AT&T’s tariffed offerings.

CenturyLink similarly encouraged the commission to focus its analysis on identifying “simple triggers” for relief from price-cap regulation (http://bit.ly/16szUJf). Incumbent providers have lost significant market share to parties that rely on their own plant, and “stand to lose even more as demand for regulated services continued to pivot toward Ethernet services offering multiple gigabits per second,” the ILEC said. That reality conflicts with the “alternate universe” described by CLECs, who “give a bleak account of competition when seeking regulatory benefits on Twelfth Street, while conveying an optimistic and far more accurate account when seeking investment on Wall Street,” CenturyLink said. (FCC headquarters is located on 12th St. in Washington.) Any framework adopted by the FCC should focus on the “prospects for competitive deployment” while also accounting for rapid technological change, it said.

Verizon and Verizon Wireless also said the FCC would face difficulty designing a model that properly accounts for the “dynamic” nature of the “high-capacity marketplace” (http://bit.ly/16sAAhL). Any econometric model would have difficulty accounting for how special access services are priced, Verizon said. Any analysis must be “forward-looking,” Verizon said, capturing all forms of “actual and potential competition” -- including IP-based broadband services. Regardless of any carrier’s incumbent status, “much of the marketplace” is “up for grabs,” the filing said. Like the other ILECs, Verizon argued it’s “premature” to analyze terms and conditions for special access, as there is currently “insufficient evidence” to make any findings regarding the state of competition for high-capacity services.

Many CLECs disagreed. In joint comments filed by BT Americas, Cbeyond, EarthLink, Integra, Level 3 and tw telecom, the competitive carriers urged the commission to act immediately to prohibit the “exclusionary terms and conditions” they say are prevalent in ILEC special access purchase agreements (http://bit.ly/16sALtg). The record already developed “clearly demonstrates” the need for FCC action, and ILECs have “failed to provide a meaningful defense” of their agreements, the CLECs said. ILEC arguments that purchase arrangements are “voluntary” fail, because ILECs “own the only last mile facilities to many locations and purchasers cannot afford to pay the [ILECs'] exorbitant rates that would apply if they did not agree to the purchase agreements,” the CLECs said. A full market power analysis is necessary, the CLECs said, urging the FCC to reject ILEC proposals that any analysis rely heavily on “potential competition."

Sprint Nextel wants any analysis to include an assessment of ILEC market power (http://bit.ly/16sBRFs). The existence of potential alternatives, such as IP-based services and fixed wireless, “does not diminish the commission’s obligation to protect purchasers of TDM-based services,” Sprint said. The carrier also encouraged the commission to address “unjust and unreasonable” ILEC terms and conditions. Such “loyalty mandates and termination penalties” restrict customers’ ability to purchase services from alternative providers, Sprint said. The FCC has more than enough record support “for immediate action” to prohibit provisions that require buyers to purchase more than 50 percent of their past purchases from the incumbent, and early termination fees that exceed the sunk cost required to provide service to a specific customer and that have not already been recovered, Sprint said.

NCTA said it is “highly unlikely” that the commission will be able to perform a “timely and meaningful analysis” of data submitted by thousands of companies documenting every rate element and every rate facility going to every commercial customer in America (http://bit.ly/16sBsmB). The “staggering” scope of the data collection and proposed analysis must be streamlined to focus on the “most relevant” factors, NCTA said: where business customers are located, where competitive facilities have been deployed, and the relationship between those two factors and ILEC prices. The FCC’s proposed analysis is “far too complex to produce meaningful results in a meaningful time frame,” NCTA said. “The approach set forth in the Further Notice is so complex and overwhelming that it is unlikely to be fruitful."

NASUCA urged the commission to reject ILEC attempts to “obfuscate the analysis of markets with discussion of new technologies” (http://bit.ly/16sCoqU). The proceeding’s goal, said the association of state regulators, should be to “correct the current flawed regime” by using a traditional market power analysis: “All consumers ultimately pay the price of exorbitant special access rates and unreasonable terms and conditions.”