AT&T Accuses BT of Hypocrisy in Advocating US Special Access Regulation

AT&T accused BT of hypocrisy in pushing special access regulation in the U.S. that it opposes in the U.K., where it’s the incumbent. And the rate regulation that BT is advocating in the U.S. hasn’t worked in the U.K., said AT&T Senior Vice President-Federal Regulatory Bob Quinn, in a blog post Thursday. “BT wants the US to adopt a regulatory regime like it has back home in the UK even though, based on the facts, that would mean significantly less broadband investment, higher prices, and really bad customer service,” he said. “And all so BT can get lower prices for services that are already cheaper in the US than the same services [in] the UK. Why on earth is that a remotely tenable policy argument? Or even a good idea?”

Noting a Financial Times article about BT’s arguments for regulating special access business services in the U.S., Quinn said a BT spokesman didn’t explain how reimposing "strict rate regulation” would promote fiber investment, presumably because history shows otherwise. Quinn said European regulators were re-examining policies that he said left Europe, and the U.K. in particular, lagging the U.S. in broadband investment. When U.K. regulator Ofcom proposed rates for copper network services that BT deemed too low, BT threatened to back off fiber investments, he said. When competitors asked Ofcom to halt further rate increases and require BT to spin off its special access arm, BT’s CEO accused them of “quite staggering” hypocrisy, Quinn said, saying that BT is guilty of equal hypocrisy in the U.S: “It turns out BT does opine on the impact of rate regulation on investment … when it comes to their rates and their investment.”

BT emailed a statement in response: “Unfortunately, AT&T is continuing the company’s long tradition of twisting the facts and hiding the truth in an attempt to distract from the real issue. The sad fact is that in the United States, AT&T and Verizon dominate the telecommunications market and use their position to overcharge consumers and businesses for slower broadband speeds and inferior service. This isn’t sustainable competition. It’s a duopoly that is stifling American innovation. This current market failure is why the FCC is currently reviewing the state of the market to determine whether there are opportunities to improve competition. BT along with a diverse coalition of U.S. business and public interest groups, supports the FCC’s efforts to investigate needed reforms that will create a level playing field and promote a healthier broadband economy in the U.S. and throughout the world.”

Contrary to BT claims it’s paying higher special access rates in the U.S. than elsewhere, Quinn said Organisation for Economic Co-operation and Development data show the prices BT charges in the U.K. are almost 50 percent higher than BT or anyone else pays in the U.S. for equivalent services. Ofcom is even considering “some pretty radical steps” to address BT provisioning problems, he said: “Not surprisingly, BT’s competitors there are asserting that the provision woes are caused by ... lack of investment.”

Quinn said the problems in the U.K. are why the U.S. abandoned strict rate regulation 15 years ago. “But BT, in its ‘staggering’ hypocrisy, apparently assumes people here are not only ignorant of the real facts, but that we’ll also overlook BT’s own past statements criticizing those same UK policies it now says the US should emulate,” he said. “Good luck with that.”

Special access generally covers services offered over incumbent DS1 and DS3 lines (24 and 672 voice-grade equivalents, respectively) connecting to businesses or providing interoffice transport. CLECs and some wireless companies say they often need regulated wholesale access to the ILEC circuits to serve businesses or provide backhaul. AT&T, CenturyLink and Verizon oppose such regulation on legal and policy grounds. They say the FCC would have to overcome well-established precedents and that CLEC and cable entry has arguably made the business market competitive while rate regulation would discourage fiber investment.

In a recent submission to the FCC, BT Americas joined Birch Communications and Level 3 in arguing the commission has “broad discretion” to adopt rate regulations for ILEC special access services. They said the courts have granted the FCC substantial deference on ratemaking decisions under sections 201 and 202 of the Communications Act, which contain ambiguous terms such as “just,” “reasonable,” “unjust” and “unreasonable” rates and practices. “Under Chevron, such ‘ambiguities in statutes within an agency’s discretion to administer are delegations of authority to the agency to fill the statutory gap in reasonable fashion,'" they said in docket 05-25. "‘Filling these gaps,’ the Supreme Court has explained, ‘involves difficult policy choices that agencies are better equipped to make than courts.’” They also said the FCC had leeway to make specific changes to the special access regime, including through use of an annual “X-factor” to account for productivity gains and cut rates. The FCC can “easily avoid making errors” and avoid a court remand by examining the evidence and adequately explaining its decisions, they said.

The FCC pushed back a comment deadline to Sept. 25 in the rulemaking so parties can review industry data that has been submitted to the agency but not yet released. With that deadline approaching, parties to the proceeding believe the agency will push back the deadline again. Before releasing the data, which is commercially sensitive, the FCC needs to resolve various objections to its release (see 1507210027), an action that could come soon, parties told us.