Verizon urged the FCC to deny business user groups’ request that ...

Verizon urged the FCC to deny business user groups’ request that the FCC adopt an interim X factor of 5.3% for interstate special access rates as part of the ILEC price caps formula. The adoption would take effect July 1, when the existing price regulation regime expires (CD May 12 p6). Verizon also challenged an ATX request to reset rates in Phase II areas to price cap levels, bar further rate increase and afford special access customers a “fresh look” enabling them to abrogate their contracts with price cap LECs. The 5.3% factor, proposed in the rulemaking and requested by the eCommerce & Telecom User Group (eTUG) and the American Petroleum Institute (API) Telecom Committee, would apply until the FCC ends the proceeding. “Competition has grown rapidly and prices have dropped,” Verizon said: “There is no basis for imposing arbitrary and severe limits on those rates without even waiting to evaluate the record to be compiled in [the special access] proceeding.” Imposing “intrusive new regulatory measures” on the competitive special access business would harm competition because “it would deter investment by all providers, including incumbent LECs, competitive LECs and inter-modal competitors such as cable and fixed wireless companies,” the company said. Verizon also contested eTUG and API arguments that special access rates are excessive: “The sole support these competitors offer for their position is the tired refrain that ARMIS reports show high rates of return for special access and BOCs have increased certain special access rates in Phase II areas. These assertions have gained no merit by dint of sheer repetition.” Verizon also said: (1) eTUG/API are “wrong” in arguing that use of a special access X factor would enable price cap LECs to avoid reducing special access rates: “Even though the price cap index itself is effectively frozen, rates will go down in economic terms.” (2) eTUG/API are “incorrect” in claiming that the FCC never intended the X factor to remain equal to GDP-PI after the CALLS plan expired: “The Commission contemplated that X would remain equal to GDP-PI beyond the CALLS plan.” (3) Granting the relief sought would be inconsistent with the Telecom Act, because “it would amount to a rate prescription, which the Commission may not undertake unless it first finds existing rates to be unlawful.” (4) Granting the relief would violate the Administrative Procedures Act.