Incompas Hits CenturyLink BDS Cost Claims; Others Oppose New Regulation

Incompas fired back at CenturyLink opposition to proposed rate reductions for business data services, saying the telco's cost claims are based on "unreliable evidence that contradicts public statements." Parties this week continued robust BDS lobbying of the FCC, which some expect to act this fall. Incumbent telcos, a cable company and allies urged the commission not to impose BDS regulation they say will discourage investment in deployment of high-speed fiber lines and other facilities. Meanwhile, U.S. TelePacific said AT&T's most recent BDS tariff filings still didn't comply with an FCC order.

Incompas disputed CenturyLink arguments against Incompas/Verizon proposals for a new BDS regulatory framework and rate reductions to account for productivity gains in the past and going forward (see 1608150032). Incompas, which represents CLECs and other ILEC rivals, attacked a CenturyLink letter's claims that its operating expenses fell at a much slower rate than the demand for its BDS services. "It depends on opaque, results-driven accounting, and is inconsistent with prior statements by CenturyLink leadership," said an Incompas filing Thursday in docket 16-143. "The company’s financial filings fail to support the claims made in the letter. In fact, CenturyLink’s earnings statements show that the company is exploiting its market power to reap large and growing profits in the marketplace." Incompas cited details of other parts of CenturyLink's financial filings that it said undercut the ILEC's arguments.

Incompas said CenturyLink claims its BDS costs are rising were inconsistent with the company's public statements. The group cited the comments of Chief Financial Officer Stewart Ewing on a Q1 earnings call in which he played down the potential impact of possible BDS reform, saying the service was "high margin" but with few incremental expenses: "It's mostly in the investment that was required to build a service out. There's some maintenance costs, but it's probably pretty minimal.” Incompas said the FCC record shows ILECs don't face effective competition and the agency must "bring down artificially inflated BDS prices." CenturyLink didn't comment Thursday.

USTelecom contested CLEC arguments it's uneconomical for them to connect nearby fiber to BDS customers, which the CLECs have cited in arguing for regulated rates. The ILEC trade group said even independent analysis refuted the claims. "We know from the record that competing providers can and do build out from existing nearby fiber facilities to connect buildings," a USTelecom filing said. "The Commission’s own consultant, Professor Marc Rysman, acknowledged that BDS providers will build out to compete for customers up to half a mile. Similarly, former FCC Chief Economist Jonathan Baker acknowledged that providers with 'nearby' fiber (i.e., within half a mile) are potential competitors. Thus, competitive providers’ and their economists’ own filings in the record demonstrate that CLECs regularly deploy fiber facilities to reach buildings half a mile away or more." Charter Communications (here), Alaska Communications (here), TechNet (here) and CALInnovates (here) made filings voicing resistance to BDS regulation and/or urging the FCC to focus on removing barriers to private investment.

U.S. TelePacific said AT&T's latest BDS tariffs still aren't in compliance with the agency's requirements, diving into technical details. "Because price flex contracts offer channel termination rates that are lower than the 'lowest available Price Cap Zone 1 Channel Termination rate' used in PacBell’s and SWBT’s August 15, 2016 revised tariff filings, the tariffs still do not comply with the Tariff Investigation Order for all customers," said a U.S. TelePacific filing. "Where a price flex customer pays a rate that is discounted below the 'lowest available Price Cap Zone 1 Channel Termination rate,' a shortfall or early termination penalty that assesses the higher Price Cap Zone 1 rate would 'result in a carrier recovering more revenue from the customer than if the customer had met its minimum commitment.' Any shortfall or early termination penalty based on a Price Cap Zone 1 rate that is higher than the discounted price flex rate a specific customer pays would not comply with the Commission’s limits on expectation damages for that specific customer."