Verizon Yesterday versus Today:
New Wires, Old Rules?

Posted by: AT&T Blog Team on June 30, 2016 at 11:55 am

By Caroline Van Wie, AT&T Assistant Vice President of Federal Regulatory

As comments in the special access proceeding (oops, I mean Business Data Services proceeding) roll in, I thought I would put together a few sentences which accurately capture AT&T’s views on this proceeding:

“[T]here is no basis on which to increase regulation of ILEC business broadband services, including legacy special access and Ethernet.  [T]here is no evidence supporting a finding that ILEC rates for traditional TDM-based special access services (e.g., DS1 and DS3) are unjust and unreasonable.  There is no factual basis to support a finding of market power or market failure in the business broadband marketplace.  According to the Commission’s data, competitors have deployed networks capable of providing high-capacity services in all metropolitan areas throughout the country that contain concentrated demand for these services. Although the Commission’s data understate the extent of actual and potential competition, even with these shortcomings these data show competitors have deployed networks capable of providing high-capacity services in all metropolitan areas throughout the country that contain concentrated demand for these services. Despite these problems [with the 2013 data], the record confirms competitors have deployed facilities in large and small areas throughout the country — not only in downtown areas, but in all types of locations where there is concentrated demand for high-capacity services. The record also shows a wide range of providers and significant new entry, including from cable operators, and that different types of competitors are succeeding in this marketplace, using a wide array of high capacity services. Even  based on the outdated and incomplete record here, the evidence of competition where there is concentrated demand includes steadily declining retail prices; mass migration from legacy technologies (TDM) to new ones (Ethernet and broadband IP) that offer greater quality and value; disruptive facilities-based entry by cable companies; growing use of alternative technologies such as best-efforts broadband and fixed wireless; the continued growth of traditional CLECs; and the indisputable competitiveness of downstream markets, such as wireless, in which providers use business broadband services as an input.”

“[T]he record demonstrates the Commission’s analysis should include all forms of high-capacity services that customers are using to meet their needs, which includes not just legacy TDM-based special access services but also Ethernet services and best-efforts broadband services offered by cable.  For many customers, best-efforts broadband service provides a greater value proposition than dedicated services of comparable bandwidth, and the need for features such as ‘99.99 percent uptime,’ ‘the ability to prioritize traffic among different Quality of Service (‘QoS’) levels for different applications,’ and low jitter and latency is not worth the premium. Cable companies routinely market their best-efforts broadband services as an alternative to dedicated services such as DS1, and many business customers view them as competitive alternatives to legacy TDM-based dedicated services. . . .  The Commission cannot simply exclude best-efforts broadband services because they are not functionally identical to dedicated services.”

“The Commission faces a high burden before it may subject a service to regulation.  The Commission must find there is evidence of a market failure and a regulatory solution is available that is likely to improve the net welfare of the consuming public.  At bottom, market failure occurs when there is no incentive for private businesses to provide a service. There is no market failure in the high-capacity marketplace that would justify increasing the regulatory burden on Verizon and other price-cap carriers.  Market failure is rare: in most instances market forces will yield economically efficient results.  The main commenters are instead companies who have chosen to lease facilities instead of building them. They want lower wholesale prices and regulations of the terms on which incumbent telephone companies provide these wholesale services. But the focus under the Act is on competition, not providing regulatory preferences to individual competitors and their particular business models.”

None of those are AT&T’s words.  In fact, all of those statements were written by Verizon this year and submitted to the FCC in this proceeding before they teamed up with INCOMPAS (a CLEC trade group currently, emphasis on currently, opposing their pending acquisition of the assets of XO Communications before the FCC). Verizon is no stranger to doublespeak.  Remember, this is the company that appealed the 2010 net neutrality decision only to argue ten months later to re-enact the same rules on the same legal basis which it had successfully appealed.  But the BDS policy Verizon is now advocating will result in lower incentives for all carriers to invest in fiber infrastructure in this country. It may be that Verizon’s current business plans actually call for lower capital investment having just sold off vast amounts of their wireline infrastructure, but the fact remains that a “less fiber investment” policy is not one the FCC should be pursuing.

That is especially true given the expansive technology agenda announced by the Clinton campaign yesterday which seeks to connect every household in America to high-speed broadband infrastructure (and I will assume that the Clinton campaign isn’t referring to 1.5 Mbps services).  The only policies that will ultimately accomplish those goals are ones that incentivize all service providers to build fiber.  I refer again to what Verizon said earlier this year:

“Imposing price controls or other onerous restrictions on ILEC’s legacy TDM services would impede the transition to IP and deter competition and investment in at least two important respects. First, suppressing rates for legacy TDM services would increase competitors’ incentives to rely on the ILECs’ network at the expense of deploying their own competitive facilities. Even where competitors may find it profitable to deploy facilities of their own, further regulation of ILEC special access prices could create a scenario where the competitor could earn even greater profits using an ILEC’s legacy facilities. This would impede investment and competition. Second, imposing new price controls on ILEC special access services would also curb ILECs’ own incentives to invest.”

This serious potential fallout from unwise FCC action remains, despite the fact that Verizon is whistling a new CLEC-like tune.  As the FCC moves to examine the comments recently filed in this proceeding, they should remember that Verizon was for pro-investment policies before they were against them.

Write a Comment

* Required

 characters available
 

COMMENT MODERATION POLICY

AT&T pre-moderates comments on our blog before they are published. This means there will be a delay between the time a comment is submitted and it appears on the post. Profanity, or topics that are not germane to the post will not be approved for posting. If you wish to communicate with AT&T regarding customer service you may do so via phone at 1-800-331-0500. We are also available on Twitter at @ATTCares.