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Wholesale/transport services

Industry Ignites Over Special Access Regs

News Analysis Carol Wilson, Editor-at-large 4/13/2016

WASHINGTON -- The main theme of the Incompas show here this week is the need for major reform of the US competitive telecom market, focused on making it easier and less expensive for competitive service providers -- those who aren't incumbent telcos -- to reach business customers.

Virtually every major speaker on Monday addressed the competitive issues, specifically around what's called "special access" -- the last-mile connections to buildings and businesses that competitive carriers typically lease from the incumbents. And their message was consistent: The lack of competition in special access prevents them from bringing innovation and new services to a wider range of businesses.

Windstream Communications Inc. (Nasdaq: WIN) CEO Tony Thomas said the wholesale rates incumbents charge his company for those connections are often higher than the retail rates businesses pay, effectively locking Windstream out. Sprint Corp. (NYSE: S) Technology COO Günther Ottendorfer CEO said the US is in the "Stone Age" of telecom competition, compared to places like Europe and Japan. Colin Spence, senior vice president of BT Group plc (NYSE: BT; London: BTA)'s US & Canada operations, cited an instance where the high cost of special access prevented his company from bringing an innovative retail solution to the North American market. And Incompas CEO Chip Pickering repeatedly called the current largely unregulated system broken.

Then Federal Communications Commission (FCC) Chairman Tom Wheeler closed the day with the promise that his agency will fix this situation this year, with new regulations that will address pricing and contractual issues in markets where there isn't enough competition for market forces to keep incumbents in line. This wasn't an empty promise, coming days after the agency launched a notice of proposed rulemaking to seek industry input on special access. This follows months of investigation of special access contracts issued by the three largest telecom operators: AT&T Inc. (NYSE: T), Verizon Communications Inc. (NYSE: VZ) and CenturyLink Inc. (NYSE: CTL). (See FCC's Wheeler: We'll Move Fast on Biz Service Regulations.)

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Owner30815 4/13/2016 | 5:45:14 PM

Verizon I don't think Verizon has any intention of leaving the wireline business services product market, as they appear to be doubling down on fiber in urban business markets with the XO transaction. But, I do think their geographic market presence has narrowed considerably--from where it was when this proceeding began--and will narrow even further in the future. I think the truth is that Verizon is a different company than it was, which is probably the biggest argument against re-regulation, notwithstanding Verizon's "compromise." If you're interested, here are my thoughts on Verizon doing "the opposite." http://bit.ly/1VVj3IU

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KBode 4/13/2016 | 1:13:24 PM

Re: Verizon "Plus, now they will have cable under the same regulations and slowing them down."

Good insight, yes. I think that's key, and is probably what I was missing.

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brooks7 4/13/2016 | 1:08:44 PM

Re: Verizon Well, on top of that Verizon is the incumbent carrier in a relatively small footprint in the US focussed on the NE and Mid-Atlantic. That means they are at the same mercy as a CLEC in Dallas, LA, SF, Miami, Seattle, and so on. They may actually figure that it is a better business deal to normalize things for them to get a better national deal. The loss in their incumbent markets may be much less than the gain in other's markets. Plus, now they will have cable under the same regulations and slowing them down.

seven

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KBode 4/13/2016 | 11:52:48 AM

Re: Verizon Interesting. That makes sense with cable making a harder push into many of Verizon's core business areas. Maybe they hope to shape the final guidance in their favor?

Yeah as for their fixed-line exit I think the only thing left to do is sell off a few more unwanted residential markets (like upstate New York) that it's pretty clear the company has no interest in upgrading since the ROI will be so slow.

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cnwedit 4/13/2016 | 11:50:49 AM

Re: Verizon It is definitely a surprise. I'm assuming the fact that it brings everyone - including the cable industry - under the same regulatory regime for business services is one incentive.

There sems to be constant speculation about Verizon leaving the wireline business services realm. They continue to deny that, and it doesn't make sense to me, given that you need a wireline infrastructure for the wireless business, but maybe on the access side, there's some movement.

I just wonder if they think that re-regulation of special access prices is inevitable under the Wheeler FCC and it's better to bite the bullet and try to gain something, in this case forcing everyone to play by the same rules.

Price regs will hit the incumbents much harder, hence AT&T's adamant resistance, because they provide so many more connections.

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KBode 4/13/2016 | 11:40:53 AM

Verizon It was interesting to see Verizon support this reform proposal. Any idea why? Their desire to depart fixed-line access anyway to focus on their new ad empire?

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