ILEC Rivals, Verizon Laud Wheeler Special Access Proposal; ACA Concerned

ILEC competitors and Verizon praised, and a cable group questioned, FCC Chairman Tom Wheeler's proposal to replace special access regulation with a new "technology-neutral framework" (see 1604080011). The Broadband Coalition, BT, the Competitive Carriers Association, the Computer & Communications Industry Association, Incompas, Sprint and Verizon issued statements applauding Wheeler's proposal. Other major incumbent telcos and commissioners didn't comment Friday. Wheeler circulated a draft Further NPRM and tariff investigation order Thursday for consideration at the April 28 commission meeting, as expected (see 1604060052). He said he intended to adopt a final order in 2016.

“We have a business data revolution, and competition is the key. That is the message from Chairman Wheeler today," Incompas CEO Chip Pickering said. “By ending anti-competitive lock-up provisions, the FCC is speeding the deployment of new, advanced networks and is providing relief to mobile and business customers hungry for more competition." Incompas and Verizon made a joint proposal for technology-neutral special access regulation Thursday (see 1604070069).

Verizon "welcomed" Wheeler's proposal and backed his commitment to act "promptly and fairly" on the issues. "We are encouraged that he has proposed a path towards a balanced framework that would put all providers on equal footing under the same set of rules," Senior Vice President Kathleen Grillo said. "It would also rely on competition, rather than regulation, whenever possible. The framework recognizes that many different companies compete today to serve business customers and that the Commission should approach the marketplace in a technology-neutral manner." Verizon has sold its ILEC wireline systems in many states, and recently announced plans to buy XO Communications' CLEC systems.

The American Cable Association's outside counsel took issue with the proposal. "It undoes 35 years of commission precedent, and I have a simple question: Why regulate a new entrant?" said Tom Cohen of Kelley Drye, speaking to us for ACA. "Say I’m a new entrant in downtown Washington, D.C., and I’m thinking about going across the river to, say, Tysons Corner [Virginia]. Why do I want to go there if I know I’m going to be regulated? The premise of the competitive carrier decisions was we wanted to encourage entry, and we knew that new entrants could only benefit consumers in terms of pricing, innovation, reliability, quality. In other words if the competitor ever thought of jacking up prices above the incumbent's level, we had the incumbent's pricing there. Why undo this? Why deter entry?" He said many small cable companies are competing and providing alternatives to ILECs in the business market: "Why regulate them?"

FCC officials earlier suggested regulation would be focused on areas lacking competition, and said new tests and triggers would be designed to better gauge which markets are in fact competitive. Cable competition was left out of the FCC's previous collocation-based test -- which the agency suspended several years ago -- because cable didn't collocate in ILEC facilities, they said. The Wheeler proposals are an effort to level the playing field, the officials said, speaking on the condition they not be identified by name.

Wheeler proposed a new "business data service" (BDS) framework in a blog post Friday. "If we want to maximize the benefits of business data services for U.S. consumers and businesses, we need a fresh start. The marketplace is changing," he wrote. "Cable companies are entering the market, and Internet Protocol (IP)-based technologies can now deliver services traditionally satisfied by legacy, circuit-based products. Yet, competition remains uneven, with competitive carriers reaching less than 45 percent of locations where there is demand."

Wheeler said the new framework should be based on four principles. He said competition is key, and government must ensure noncompetitive markets don't harm consumers, businesses or innovation. "I propose to identify those markets that are competitive, and those that are not, and to adopt a tailored regulatory framework to mirror those distinctions," he wrote. "The new approach must be technologically neutral. Rules need to reflect today’s economy and the differences between products, places or customers, and can’t be based on artificial distinctions between companies or technologies. All BDS services should be governed by the same overarching legal principles."

FCC actions "should incentivize technology transitions" because, while circuit-switched BDS services are still important, IP-based, packet-switched communications are the future, Wheeler wrote. "The item also contains a Tariff Order proposing to bar certain specific contractual practices that slow down the switch from legacy TDM services to newer IP-based services." The FCC officials said the order would bar ILEC "all-or-nothing" provisions that force special access business customers to buy all their services from a provider's plan, thus limiting their flexibility to pick and choose. They said it would also restrict "shortfall" and "early termination" penalties for customers that don't meet their volume or term commitments. The penalties would be permitted but couldn't be "excessive" -- for instance by being more than the total amount the customer would have paid under the life of the contract. The order flows from an agency investigation of AT&T, CenturyLink, Frontier and Verizon tariff practices.

Wheeler said the FCC needs to focus on current and future market realities. "I propose that tariffing of BDS be ended -- in all markets for all BDS products," he said. "The Further Notice asks questions on how best to construct the new BDS regulatory framework consistent with these principles. It also seeks comment from all interested parties about how best to determine where competition does, and does not, exist, looking to competition among products, to the supply and ability to supply BDS in specific geographies, and to the needs of different classes of customers."

NCTA didn't comment Friday, but earlier objected to Incompas-Verizon's proposals. “The ‘principles’ suggested by Verizon-INCOMPAS seem at odds with sound economics and a policy of promoting market-driven, facilities-based competition," NCTA said Thursday. "Cable operators are new entrants in the business services market, and are investing heavily in building their own facilities to serve business customers. They are providing precisely the type of facilities-based competition that the Chairman has praised. The FCC should reject any call to impose new, onerous regulations on an industry that is stepping up to offer meaningful choices to business customers. The FCC will not achieve competition if it burdens new facilities-based entrants with regulation.”