The FCC released an Order on December 9, 2013, delaying AT&T’s proposal to eliminate its five and seven year special access term discounts tariff change for five months while it conducts an investigation into the legality of the proposed tariff changes.  The Commission found that there are substantial questions regarding the lawfulness of AT&T’s tariff revisions that require further investigation, including whether the proposed changes comply with the Commission’s rate regulations and whether they are anticompetitive or violate the 1996 Telecommunications Act.  The Commission will identify the specific issues that it will investigate in an upcoming Designation Order.

This controversy began on October 10, 2013, when AT&T stunned the industry by sending letters to its special access customers announcing that beginning November 9, 2013 it would no longer offer term discounts of more than three years on DS1, DS3 analog private line and DS0 services.  AT&T stated that it would eliminate these long-term discounts as part of its announced phase-out of its Time Division Multiplexing (TDM) to one based on Internet Protocol (IP). 

AT&T’s special access CLEC customers immediately protested to the FCC.  They claimed that the elimination of five and seven year term plans would significantly increase prices for their special access purchases for which they had no alternative supplier.  Moreover, they argued that AT&T refused to interconnect with them via IP circuits and alternative Ethernet services are not available in many locations.  Therefore, they claimed that AT&T’s proposal was anticompetitive and should be rejected 

In response to these concerns, AT&T announced on October 29, 2013 that it was postponing the elimination of these term discounts for one month until December 10, 2013.  It claimed that it would use the month to answer questions and respond to the concerns of its customers.  AT&T also told the Commission that changing its discount plans does not violate the Commission’s Rules.

Let’s be clear, there is no legal basis for the Commission to postpone or even investigate AT&T’s proposed tariff changes.  Under the price cap regulation that governs its special access rates, AT&T is free to move rates up or down as long as its stays below a revenue ceiling for all its special access services, which this proposal does.  Therefore, this proposal does not violate any Commission Rule or the 1996 Act and will almost certainly be permitted to take effect in five months.

Instead, the Commission is sending a message to AT&T that it will not permit an individual company to set the terms of its ongoing proceeding to determine the regulations that will govern the transition to an all IP network.  Issues like how special access services will sunset are ones the entire industry will have to face therefore, AT&T’s proposal “jumped the shark,” and had to be suspended. 

As new FCC Chairman Tom Wheeler noted on November 19, 2013, the Commission intends to move quickly to overhaul the current TDM network and transition to an all Internet Protocol (IP) one.  It expects to issue a transition Order in the next few months in ongoing Docket 12-353, a proceeding that was initiated by AT&T and NCTA to nudge the Commission toward starting to develop rules for the TDM to IP transition.     

The Commission wants to develop transition rules for the entire industry and is loathe to being usurped by the actions of a single company.  Thus, while there are no true legal reasons to suspend AT&T’s proposed changes, the delay provides time for the Commission to propose its own industry-wide TDM-to-IP transition.

By Andrew Regitsky, President, Regitsky & Associates