FCC temporarily suspends effort to deregulate special access

Industry remains divided on the results of the agency's decision

August 24, 2012 | By Sean Buckley

The FCC voted 3-2 to temporarily suspend rules that automatically granted requests to change prices on special access services that incumbent telcos sell to competitive service providers and wireless operators.

While the vote went through on Aug. 15, the results and order were not made public until late Wednesday.

In its decision, the FCC said that there is "significant evidence that these rules, adopted in 1999, are not working as predicted, and widespread agreement across industry sectors that these rules fail to accurately reflect competition in today's special access markets."

Before it makes a decision on what to do next with special access, the FCC said that it would "initiate a mandatory data request within 60 days to help it better understand the competitive landscape of the special access market."

Not everyone at the FCC is happy about this ruling. Republican commissioners Robert McDowell and Ajit Pai argued in their dissent that the agency's decision was made in haste.

"The majority chose to lay its procedural path backwards. Due to such glaring deficiencies, I have no choice but to respectfully cast a dissenting vote," Republican Commissioner Robert McDowell said in a statement.

"In short, the commission has reversed the steps that a data-driven agency should take," fellow Republican Commissioner Ajit Pai said.

Not surprisingly, competitive service providers and traditional telcos remain divided on this decision.

AT&T (NYSE: T) and Verizon (NYSE: VZ), two of the biggest suppliers of special access services, collectively said that while they support the FCC's call to review more data, they think the FCC should have done its homework more carefully before reaching a decision on this issue.

"While today's order acknowledges that the current rules fail to capture the full extent of existing competition, the FCC, before taking any action, should have collected the data it repeatedly has said it needs to evaluate the marketplace," said Donna Epps, Verizon's vice president for federal regulatory affairs.

Bob Quinn, AT&T's senior vice president for federal regulation, argued against what he saw as a move "to further regulate yesterday's technology" as the telecom industry moves from traditional TDM-based special access to fiber and IP-based network technologies.

tw telecom (Nasdaq: TWTC), a Colorado-based CLEC, believes this measure is a step in the right direction. Although tw telecom has aggressively built out its own fiber-based Ethernet network targeting businesses, it still has to rent last mile network facilities from the large incumbent players like AT&T and Verizon.

"It has been clear for years that the FCC's pricing flexibility rules did not accurately measure the extent to which incumbent local exchange companies control the critical last mile facilities that connect communication carriers to business locations across the nation," said Larissa Herda, chairman, CEO and president of tw telecom, in a statement. "By suspending the flawed triggers that were based on incorrect predictive judgment, prematurely allowing the incumbent local exchange companies to obtain pricing flexibility, the FCC has prevented future rate increases in markets where the incumbents have market power."