This is a crucial time for the thousands of businesses that purchase telecommunications from Competitive Local Exchange Carriers (CLECs). For several years Incumbent Local Exchange Carriers (ILECs) have been modernizing their networks, retiring and replacing copper with fiber and transitioning to networks that use Internet protocol (IP). 

Often, this technology change significantly impacts the services ILECs provide over their networks, including the wholesale services CLECs purchase to provide their own services to business customers. While CLECs may have the opportunity to purchase a replacement ILEC IP service such as Ethernet to resell, there have never been rules in place to ensure that any replacement wholesale service will offer rates, terms and conditions that will enable a CLEC to continue to offer the same service and maintain the same relationship with its business customers.

This is especially true for CLECs who serve their business customers through long-term contracts. They are concerned about the viability of these contracts if the wholesale input prices they relied on when negotiating their agreements materially increase when ILECs discontinue their legacy services, such as DS1 and DS3 special access services, and replace them with packet-based services at different rates, terms, and conditions. CLECs have asserted that in the majority of cases there are no alternative sources for the necessary wholesale inputs, and the ILEC rates for proposed replacement services are unreasonably high.

While the FCC has rightfully been concerned with the effects of this technology change on ILEC end users, until now it has given short shrift to the impacts on ILEC wholesale customers and the businesses supported through these wholesale networks. Thankfully, this is changing and businesses purchasing wholesale services from CLECs now have a unique opportunity to ensure their rates, terms and conditions are protected. But only if they act proactively! 

On August 7, 2015, the FCC released a Report and Order in Docket 13-5, its “Technology Transitions” proceeding finally addressing CLEC concerns about the availability of wholesale services during the industry transition from a Time Division Multiplexed (TDM) network to an all-IP network. The Order protects CLECs and their customers in two important ways:   

First, the Commission clarified that an ILEC must obtain its approval if its elimination of a wholesale service results in the discontinuance, reduction or impairment of service to end users, including a carrier-customer’s retail end users. 

Specifically, ILECs must undertake a meaningful evaluation of the impact of its actions that will discontinue, reduce, or impair services used as wholesale inputs and assess the impact of these actions on end user customers. This must include consultation directly with affected CLECs to evaluate the impact on the CLEC’s end users.  If its actions will discontinue service to any such CLEC end user, Commission approval is required.

Second, the Commission developed interim rules for wholesale competition to be in effect until its special access investigation is complete and new rules are implemented. 

To receive authority to discontinue, reduce, or impair a legacy TDM-based service that is used as a wholesale input by CLECs, an ILEC must commit to providing CLECs wholesale access on reasonably comparable rates, terms, and conditions — but only until the Commission: (1) identifies a set of rules and/or policies that will ensure rates, terms, and conditions for special access services are just and reasonable; (2) provides notice such rules are effective in the Federal Register; and (3) such rules and/or policies become effective. An FCC special access order is not expected until 2016 or 17.   

The interim reasonably comparable wholesale access condition applies to two categories of service: (1) special access services at DS1 and DS3 speeds; and (2) commercial wholesale platform services such as AT&T’s Local Service Complete and Verizon’s Wholesale Advantage. These services allow CLECs to purchase unbundled voice loops, switching and transport in one package to offer voice service to enterprise customers.

The Commission will evaluate compliance with this “reasonably comparable wholesale access” requirement based on the totality of the circumstances and will consider the following questions for the replacement wholesale services:

Will Price per Mbps Increase?

Will a Provider’s Wholesale Rates Exceed Its Retail Rates?

Will Reasonably Comparable Basic Wholesale Voice and Data Services Be Available?

Will Bandwidth Options Be Reduced?

Will Service Delivery or Quality Be Impaired?

While the protections in the Order are geared toward CLECs, it is necessary for businesses that rely on CLEC networks to become involved to ensure they themselves are protected. Here are some actions that CLEC business customers can take.

First, make sure that the proper channel exists to ensure that you are notified whenever an ILEC notifies your CLEC supplier that it is planning on discontinuing, reducing or impairing a wholesale service that the CLEC is utilizing to serve you. 

Meet with your CLEC supplier to determine if the prices, terms or conditions of the services it provides to you will be impacted. 

At that meeting, satisfy yourself that the service functionality and quality provided to you through your CLEC’s operating support systems will be reasonably comparable to what you are receiving today.

The replacement DS1, DS3 and wholesale services provided to CLECs should not be used to justify a rate increase to you. If your CLEC supplier claims it must increase its prices, or must renegotiate your contract, don’t buy it! 

If the CLEC “justification” is legitimate, then it should be happy to meet with you and the FCC to explain to the Commission why the ILEC substitute service is inadequate and the ILEC should not be granted FCC authority to discontinue its current wholesale service. If the CLEC refuses your request, you can assume it is using the technology change as an excuse to modify your contract. You should find that unacceptable and can always shop around with other CLECs or even the ILEC.

Always be prepared to meet with the FCC if you are unhappy with the replacement services proposed by an ILEC or with the explanation your CLEC supplier provides for why your contract must be renegotiated. 

While you can send a letter to the Commission expressing your concerns, a face-to-face visit is a much better alternative. Even if you fear that you are not a “telecom savvy” as an ILEC or CLEC representative, the FCC is very appreciative of business owners and executives who use their own words to explain the real world impacts of its orders.

Finally, it is important for businesses to monitor the FCC’s special access investigation. Once an order in that proceeding becomes effective, the interim replacement services you are using could be suspended or even terminated, with CLECs and their customers forced to move to packet or other special access services. Businesses should work to ensure that any such change to ILEC wholesale service requirements does not affect their ongoing supplier-customer relationship with CLECs.

The FCC's Technology Transitions Order provides a great opportunity to ensure that your business is unaffected by the industry change to fiber-based IP networks. The Commission has set out rules to protect your relationship with your CLEC suppliers, but only by educating yourself about these rules and proactively involving your business in the proposed changes can you ensure that these protections apply to you. The ball is in your hands. Do not be a passive observer!

By Andy Regitsky, CCMI