AT&T Says CLECs Pressing FCC To Reregulate ILEC Ethernet

AT&T said CLECs want the FCC to reregulate ILEC fiber-based ethernet services in addition to legacy copper-based “TDM” services, as part of its special access business broadband review. Ethernet regulation would require a new proceeding but still would make no sense, said an AT&T blog post Wednesday by Caroline Van Wie, assistant vice president-federal regulatory. Incompas, which represents CLECs, Sprint and others, said ethernet has been part of special access proceedings for years and incumbent telcos still have "market power" in dedicated connections to most business customers, justifying further regulation. The FCC had no comment.

Van Wie said the copper era is coming to an end, but CLECs appear “hell-bent” on pushing to regulate “disappearing” TDM (time division multiplex) special access services, which is a “peculiar” effort. “And sure enough" recent CLEC statements confirm "their agenda has changed,” she said: “Notwithstanding that this proceeding was initiated to address the regulatory status of TDM services, CLECs are now asking the Commission to take a sharp left turn and use this proceeding to impose old fashioned, monopoly-era rate regulation on incumbent local exchange carriers’ (ILECs) last mile fiber Ethernet connections.” The document AT&T cited was a Sprint filing.

The FCC would have to initiate a new proceeding to even consider ethernet regulation because “it cannot simply bootstrap that issue into a proceeding about TDM services,” Van Wie said. “Even then, undoing the FCC’s grant of forbearance for fiber Ethernet services now would be a very heavy lift. Forbearance was not designed to be an on/off switch that can be flipped at the Commission’s whim, but to provide permanent relief when regulations are no longer necessary.”

There is “no substantive basis for revoking” forbearance decisions that deregulated ethernet services, a market that is even more competitive than when the ILEC relief was granted, Van Wie said. “ILECs, CLECs, cable companies and others have invested billions to build-out fiber infrastructure in the race to provide high-speed business services. Data collected in the special access proceeding show that these networks are so extensive that they reach virtually every census block that today has any demand for special access services.”

CLECs are trying to exclude cable companies and others from the analysis because the data show robust competition exists, Van Wie said. “But that tactic cannot be credited because cable is an important facilities-based special access competitor that goes head-to-head against ILEC and CLEC special access services and has multiple technologies in its arsenal, including fiber-based Ethernet, HFC-over Ethernet, and 100+ Mbps broadband Internet service,” she said. “Cable companies are now able to deploy Ethernet over their near-ubiquitous [hybrid fiber coax] HFC architecture, allowing them to provide lower speed (10-20 Mbps) symmetrical Ethernet services across their footprints without requiring any major infrastructure upgrades.”

Van Wie disputed CLEC arguments that 5G wireless requires ILEC broadband regulation to help competitors provide backhaul and connect microcells. “That’s exactly backwards,” she said. “Putting aside the fact that standards for 5G won’t be final until 2018 and engineers are already envisioning microcells deployed using new self-backhaul techniques, the construction of new 5G Ethernet backhaul facilities will only spur more competition by increasing demand for backhaul.” She said Sprint recently awarded contracts to dozens of competitors to build 5G ethernet backhaul to 38,000 macrocell sites. The same competitors will be similarly well situated to provide further 5G ethernet backhaul, particularly given their widespread fiber deployment, she said.

“The Ethernet market is already robustly competitive, and the coming 5G revolution will provide even more opportunities for competition to flourish,” said Van Wie, urging the CLEC push to be rejected. “As the cable industry has astutely pointed out, imposing unnecessary rate regulation on a highly competitive market will only undercut everyone’s incentives to invest in facilities-based infrastructure, creating dependence on below-cost ILEC facilities.”

Verizon urged the FCC to ensure a “level playing field” as the business broadband market shifts away from legacy services to providers of all kinds, particularly cable. On proposals to roll back ethernet forbearance and change legacy special access terms and conditions, Verizon said the agency should factor in market developments and “regulate all competitors evenhandedly,” in a filing Wednesday in docket 05-25 summarizing a meeting with FCC General Counsel Jonathan Sallet.

Incompas said AT&T is wrong on process and substance. "AT&T can pretend otherwise, but Ethernet services have been part of this proceeding for a number of years," emailed Karen Reidy, the group's vice president-regulatory affairs. "AT&T did not even get forbearance relief for its existing Ethernet service, AT&T Switch Ethernet, so 'reversal' is not even necessary in its case. As the DC Circuit has said forbearance relief 'is not chiseled in marble … the FCC will be able to reassess as they reasonably see fit based on changes in market conditions, technical capabilities, or policy approaches to regulation in this area.' The fact is the incumbent is the only provider of dedicated services to the vast majority of business locations. That’s market power. Without strengthening pro-competition policies, we will not have the game changing innovations of the future that competitors bring to the market, as they did with Ethernet services. The Bells are seeking to cut off retail competition, and saddle business customers across the country with higher prices and less choices for broadband service."