FCC Denies Verizon's Rate Request

Smaller CLECs will continue to get discount rates for using Verizon's lines, the agency declares

Raymond McConville

December 5, 2007

2 Min Read
FCC Denies Verizon's Rate Request

'Tis the Christmas season, and, in the holiday spirit, the Federal Communications Commission (FCC) has ruled that Verizon Communications Inc. (NYSE: VZ) must maintain its selfless generosity towards CLECs and other carriers that lease the incumbent's lines in certain markets.

The FCC decided late yesterday that Verizon is still required to give smaller carriers access to its network at discounted rates, so to increase competition in certain markets. The decision affects six U.S. cities: New York; Boston; Philadelphia; Pittsburgh; Providence, R.I.; and Virginia Beach, Va.

Verizon had asked the FCC to remove this requirement more than a year ago, arguing that it's facing increased competition already from cable, wireless, and VOIP operators. (See Verizon Asks FCC to Undo Unbundling.) That competition has resulted in the carrier's recent loss of traditional access lines.

But the FCC agreed with the little guys that they could very well have gone out of business in this fiercely competitive market, were it not for the reduced rates.

Companies like Broadview Networks Holdings Inc. , Covad Communications Inc. , EarthLink Inc. (Nasdaq: ELNK), and XO Communications Inc. use Verizon's lines for at least parts of their networks.

Broadview, which recently filed for an IPO, has had no problem increasing revenues, but its losses have gone up, too. Broadview arguably could have been crippled if Verizon were allowed to charge much higher rates. (See IPO Alert: Broadview Files Its S-1.)

While legislators applauded the FCC's decision, Verizon said the FCC was actually inhibiting competition.

"If the FCC had approved these petitions, it would have permitted Verizon to provide network facilities at commercial rates," Verizon executive vice president Tom Tauke said in a statement. "Instead, the Commission missed an opportunity to promote and encourage facilities-based competition by continuing to require one of the network providers in these markets to sell unbundled facilities at government-mandated, subsidized prices."

On top of trying to force CLECs to pay higher rates, Verizon has also inhibited them by cutting the copper loop from homes in which it installs FiOS. This makes it impossible for a CLEC to provide service to that specific home. (See Got FiOS? Say Goodbye to DSL.) Verizon says its policy is to leave the copper in place if the customer requests it.

— Raymond McConville, Reporter, Light Reading

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