The most important competitive issue for CLECs in 2015 and beyond is the availability of Internet protocol (IP) wholesale services to replace time division multiplexed (TDM) services such as special access that are being phased out by ILECs. Without such replacement services, CLECs face the prospect of having no access to critical inputs, at least not on reasonable terms and conditions. Clearly, this would prevent them from continuing to provide competitive alternatives to small- and medium-sized businesses and other institutions like schools, libraries, and health care facilities.

Thankfully, the FCC has made it clear in recent discussions that it is sensitive to these CLEC concerns. It is considering adopting, in some form, Windstream’s six principles requiring ILECs to provide wholesale access at equivalent rates, terms, and conditions as a condition of obtaining Section 214 authorization to retire their TDM services.    

In a recent meeting with the Commission Windstream provided more details about these principles. For example, equivalent wholesale access would be required when an ILEC discontinues a legacy service offered at speeds of 50 Mbps or less. This would ensure that all current DS1 and DS3-based services have IP replacement services made available. Windstream chose the 50 Mbps requirement because:

The IP offering in the market that typically is closest in transmission capacity to DS3 special access service is 50 Mbps Ethernet. Thus, limiting application of this principle to 50 Mbps Ethernet means TDM-versus-IP pricing equivalency generally only would be considered for capacity that is currently provided with tariffed special access inputs and rate limitations would be preserved consistent with the current status quo (Windstream May 15, 2015 letter to FCC, Docket 13-5, p. 2).

In addition, Windstream specifically emphasized the importance of IP replacement services for DS1-based services, since these comparatively lower capacity circuits are used to serve many, if not most of their small and medium –sized business customers.

Finally, Windstream and other CLECs continue to argue that unbundled DS1 and DS3 loop capacity must continue to be available for CLECs to use to fashion their own local services in an all-IP environment. 

Here are Windstream’s six principles for wholesale IP services:  

(1) Price per Mbps Shall Not Increase - The price per Mbps of the IP replacement product shall not exceed the price per Mbps of the TDM product that otherwise would have been used to provide comparable special access service at 50 Mbps or below.

(2) A Provider’s Wholesale Rates Shall Not Exceed Its Retail Rates - An incumbent’s wholesale charges for the IP replacement product shall not exceed its retail rates for the equivalent offering.

(3) Basic Service Pricing Shall Not Increase - The wholesale price of the lowest capacity level of special access service at or above the DS1 level shall not increase (e.g., 2 Mbps Ethernet price shall not exceed the DS1 price when 2 Mbps is the lowest Ethernet option available).

(4) Bandwidth Options Shall Not Be Reduced - Wholesale bandwidth options must, at a minimum, include the options that the incumbent offers to its retail business service customers.

(5) No Backdoor Price Increases - Price hikes shall not be effectuated via significant changes to charges for NNI or any other rate elements, lock-up provisions, ETFs, special construction charges, or any other measure.

(6) No Impairment of Service Delivery or Quality – Service functionality and quality, OSS efficiency, and other elements affecting service quality shall be equivalent to, if not better than, what is provided for TDM inputs today. Installation intervals and other elements affecting service delivery shall be equivalent to, if not better than, what the incumbent delivers for its own or its affiliates’ operations.

It is important to note that even if the Commission were to adopt these principles, CLEC s would still have the problem of negotiating IP interconnection agreements with ILEC s without the benefit of the TDM interconnection rules. In many cases, ILECs are using their market power to negotiate favorable prices, terms and conditions for themselves, while telling CLECs to take it or leave it. Unfortunately, even while it is likely to issue an order on Windstream’s proposals later this year, the Commission has shown no inclination to regulate IP interconnection. CLECs ought to be lobbying the Commission a lot harder on this issue than they appear to be doing today.

By Andy Regitsky, CCMI