Tuesday’s House Oversight Hearing with the FCC Commissioners highlighted once again the ongoing debate on the special access issue.  As a refresher, special access services are really not-so-special in today’s Internet age.  These services are generally legacy copper, TDM technology circuits – 95% of which deliver data at 1.5 Mbps, a speed that doesn’t even qualify as “broadband” in the FCC’s latest overhaul of universal service.

As we have previously pointed out, rather than focus on yesterday’s technology, the FCC should instead be creating a path to transition these legacy services to fiber-based technologies that deliver world-leading broadband speeds to all consumers.  If we focus our policy efforts there, we will speed the deployment of new infrastructure (and new infrastructure investment) as well as create jobs, not only in building that infrastructure and selling IP hardware and equipment, but also by bringing more communities the benefits of being connected to the Global Internet – all goals that have wide, bi-partisan support.

At the hearing, Chairman Genachowski made a few things relatively clear.  

First, the Chairman has no intention of re-examining the FCC Forbearance Orders that declared fiber–based services like Ethernet, SONET and Optical services fully competitive and eliminated price regulation.  That is particularly good news because dragging Ethernet and other fiber-based services back into the world of Title II rate regulation is exactly the kind of misguided policy that would disincent infrastructure investment by all providers and actually be a job-killer rather than a job-creator.

Second, the Chairman continues to believe that the existing triggers are broken and that he intends to issue a mandatory data request and then create a “new analytical framework” at some undefined point in the future to govern these legacy services.  To be fair, a data request is also potentially good news if the data is used to aid in the transition to All-IP infrastructure.

So, let’s game this out a bit to get an understanding of exactly what could happen here if the FCC decides to look backwards at old technology instead of forward to new IP infrastructure, investment and job-creation.

The FCC could issue an Order regarding mandatory data collection and declare its intent to redo the existing pricing flexibility rules at its August 3rd Open Meeting.  Assuming that it simply makes mandatory the first two voluntary data requests that were submitted to the industry over the last two years, and attaches those data requests and accompanying rule changes to the Order, the Commission can act fairly quickly to at least begin the OMB process they must go through to collect data from the industry.

That process can take several months; the FCC itself estimates four months.   But if the Commission gets bogged down, the road to OMB approval can be longer than that.

So, let’s say the FCC gets through the OMB process in four months; it can then issue its data request by year-end 2012.  It has to give the industry time to respond.  If it is 60 days, the industry provides data by March 1, 2013.  Once received, the FCC Staff will require a period of time to review the data and make it available to the industry.  With the last two voluntary data requests, the information was made available to the industry for review approximately 17 months after the initial data request, but I will cut that time (even though there will be significantly more data to analyze this time after a mandatory request) and say it will be only five months before the industry can review the data.  That pushes us out until August 2013.  I will assume for argument’s sake that the FCC staff acts quickly to prepare an NPRM on a new analytical framework and the FCC quickly votes that NPRM with new proposed rules on DS1/DS3 technology – September 2013.  I will also assume a short comment cycle on the NPRM and relatively quick action by the Commission.  Thus, if everything goes according to plan, the FCC could issue a Final Order with a new analytical framework for DS1, TDM services by the beginning of January 2014, which will then go into effect 30 days after publication in the Federal Register.

So, under this scenario, sometime in the first quarter of 2014, it will have new rules which the Commission will then have to implement in the +250 MSAs that have received pricing flexibility under the current, bright-line rules.  Just in time for the 2014 Winter Olympics.

But wait, we’re not done yet.  One of the arguments that competitors have made is that an MSA is too large a geographic area for relief and the new Commission rules should be more disaggregated.  Will the Commission cut the MSA in half?  Will it cut the MSA in thirds?  Again, I am an optimist; let’s say the FCC cuts the MSAs in half.  That means that the new analytical framework will have to be applied to +500 newly defined markets (cutting the MSA in half doubles the number of markets to be addressed).  How long do you think it will take the FCC to do the analysis and Orders required to figure out the price flex rules for those +500 markets – all of which will have to be Orders with developed factual records?  I mean our price flex petitions this year with no opposition took five monthsWill it take one year?  Two years? Three years?   Are we still doing this in 2020…in time for the 2020 Summer Olympics?

And all to figure out a regulated pricing structure for copper-based TDM 1.5 Mbps services that are not even considered broadband under the FCC rules.  How much time and resources will the FCC devote to these legacy technologies at the expense of developing a plan to migrate these services to Ethernet or some other actually fast, real broadband IP technology?  Looks like a lot to me.  I assure you, by the time this process is completed every other country in the world will have migrated to IP technology.

Wouldn’t it be better from a policy perspective to be world leaders in this area and instead devote our limited resources to easing the path to investment in new, IP technologies by network providers, equipment manufacturers and consumers?  If we don’t begin that process until we’re done here, we will be looking up at the Top 10 IP technology countries in the world, not down at them.

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