Incompas, Verizon Propose 'Technology-Neutral' Special Access Principles

With FCC action apparently looming, Incompas and Verizon jointly proposed principles for a new regulatory framework for all dedicated business services, including ethernet. "We agree that we need a new technology-neutral model -- one that is legally sustainable, that recognizes the changes in the marketplace over the last ten years, that is flexible enough to accommodate new technology and new competitive circumstances going forward, and that will encourage the transition from legacy services to IP and more advanced communication services," said Verizon Senior Vice President Kathleen Grillo and Incompas CEO Chip Pickering in a statement Thursday that accompanied a letter to the FCC filed in docket 05-25. "While we don’t agree on everything, and there is more work to be done, these principles are an important first step towards bringing an end to this proceeding and reflect a balanced approach that incorporates the concerns of both sides of this debate."

The FCC was expected late Thursday to circulate a draft special access item, a stakeholder told us. The agency released a tentative agenda for its April 28 meeting that included the item. The draft was expected to include an order, growing out of an FCC investigation, that concludes some incumbent telco tariff terms and conditions are anti-competitive, and makes "market power" findings, the stakeholder said. It also would include an NPRM seeking further comment on special access pricing issues and potential regulatory actions, with Incompas-Verizon principles also teed up, the stakeholder said. Informed sources told us Wednesday the FCC would circulate the draft item Thursday (see 1604060052).

In their FCC letter, Incompas and Verizon noted they had very different views on how the market for special access services, both traditional TDM and cutting-edge ethernet, should be regulated. Despite the differences, the CLEC/competitor group and Bell agree it's time to bridge the divide and develop a permanent regulatory framework based on technological neutrality. "All providers offering the same or similar services should be subject to the same overall regulatory framework," said their filling, which was signed by Grillo and Pickering. "That includes not only incumbent providers, but also cable companies and other wireline competitive providers that now compete in this marketplace."

The FCC should make clear all providers of dedicated services are subject to Title II of the Communications Act, Incompas and Verizon said. "Subject to such a clarification, Verizon would not oppose an order placing Verizon on the same footing today with regard to Ethernet services as cable companies, competitive providers and other incumbent LECs that have received forbearance relief from dominant carrier regulation and is adopted at the same time as an order adopting a permanent framework," the filing said.

The FCC should seek comment on a regulatory framework that moves away from "the current dominant/non-dominant" structure and adopts a new model, Incompas and Verizon said. "That new model would rely on ex ante rate regulation in relevant markets with insufficient competition. Under the new model, in relevant markets that are insufficiently competitive, price regulation is warranted on a technology-neutral basis. The FCC would apply rate regulation to constrain prices and ensure that providers could not abuse their market positions by imposing rates, terms or conditions that are unjust or unreasonable, or unjustly or unreasonably discriminatory."

"In relevant markets where there is sufficient competition, the FCC would not need to apply ex ante rate regulation but would instead rely primarily on market forces to discipline prices and ensure a dynamic marketplace," Incompas and Verizon said. "Providers offering dedicated services in these sufficiently competitive relevant markets would still be subject to Title II, including Sections 201 and 202 of the Communications Act." The new model would cover all dedicated services, TDM and packet-based services such as ethernet, they said, adding that "there should be a relationship between wholesale and retail pricing."

Incompas member Sprint welcomed the joint proposal. "Sprint has argued for many years that the current market for dedicated broadband circuits, a.k.a. special access, is broken," a company statement said. "Indeed, data that the FCC just allowed to become public demonstrates that 73% of these locations are served by a monopoly and a staggering 97% have a duopoly at best. Establishing a forward-looking, sustainable framework to address these non-competitive markets is critical to the future of broadband services in the United States." Another industry source said at first blush "it appears Verizon is thinking cable is the more formidable competitor in this market, not CLECs."

Despite the partial truce, Competify and USTelecom put out conflicting views of the industry data the FCC said could be made public in aggregated form. "The data demonstrates without question that the majority of high-capacity broadband lines across America are controlled and operated by monopolies or, at best duopolies," emailed Competify, which used information from Sprint FCC filings. "Although some will try to spin the facts, we’ll let the data speak for itself. There is effective competition in, at most, 3% of locations nationwide. In fact, fewer than 1% of locations are served by at least four providers and only 2% are served by three providers."

USTelecom said the data show "real, facilities-based competition" under current policies, with competitive facilities available in 95 percent of all census blocks where there's special access demand. Cable is present virtually everywhere there is such demand, USTelecom said in a release. "The failure of some competitors to invest & build facilities to connect their business customers to nearby fiber, and instead call for more government intervention, is a business decision not a market failure," it said.