Industry comments were filed on February 22, 2016 in Docket 13-3 to refresh the record on the United States Telecom Association’s (USTelecom) 2012 Petition requesting the FCC to declare that ILEC interstate mass market and enterprise switched access services are no longer dominant services.  In the Petition, USTelecom claimed that since ILECs are continually losing wireline access lines to wireless, VoIP and cable services, ILECs should be permitted to file switched access rates completely free of price cap or rate-of-return regulation with reduced cost support and tariffing obligations.

In 2013, the Petition was opposed by all switched access customers who argued that regardless of customers lost, ILECs nevertheless continued to have a complete terminating monopoly over the local loop for the customers they still served. At the time, the Commission took no further action on the Petition.

Just recently, however, the Commission released a Public Notice requesting additional comments to refresh the record in this proceeding.  As one might expect, this simply resulted in all parties hardening their original opinions.  For example, as CenturyLink pointed out, since the original Petition was filed, ILECs have lost even more wireline customers.

The factual foundation of the Petition is indisputable – ILECs are no longer dominant carriers in the provision of voice services and indeed a remarkable transformation has occurred in the competitive landscape whereby almost 50% of U.S. households are “wireless only” and the number of households subscribed to ILEC switched access service either already is surpassed by, or soon will be surpassed by, the number of households served by interconnected Voice over Internet Protocol (VoIP) service...In the face of this overwhelming record, opponents of the Petition present no credible basis for denying the Petition.  Indeed, the only purported basis they cite is the contention that, regardless of how small their market share gets, ILECs shouldn’t be treated as non-dominant because they maintain a termination monopoly as to their own end-user customers. But…the Commission has long recognized the limitations of this termination monopoly theory.  And, regardless, it is a phenomenon that is equally true for all providers in this competitive space and it, therefore, cannot, by itself, be the basis for imposing dominant carrier regulation anymore. Given that the Petition merely asks for limited relief that will establish a level playing field for all providers, the Commission should expeditiously grant the Petition (Docket 13-3, CenturyLink Comments, filed February 22, 2016, at. p. 1-2).

However, Sprint noted that ILECs continue to have free pricing reign over the switched access rates they continue to charge their remaining customers despite access reform:

In the historic [Access Reform] Order, the Commission mandated (among many other things) a multi-year transition to bill-and-keep for a subset of switched access services – terminating end office switching and certain transport rate elements.  Despite the overwhelming benefits of a system of bill-and-keep, a transition to this regime still has not been established for any originating switched access rate elements, or for any of the following services: dedicated transport, tandem switching and tandem transport in some circumstances, dedicated transport signaling, and signaling for tandem switching.  In other words, for a wide swath of switched access rate elements, the ILECs continue to impose inefficient, non-cost-based charges on their access customers. ILECs’ unilateral ability to assess supra-competitive rates is evidence of their continued market power over these services, and belies their claim to a presumptive lack of dominance in the provision of switched access services (Docket 13-3, Sprint Comments, filed February 22, 2016, at. p. 2).

And the Michigan Public Service Commission (MPSC) reminded the FCC that in many rural areas of the country, wireless and broadband services are still not widely available or reliable. In those areas ILECs remain truly the carrier of last resort:

The FCC should deny USTelecom’s petition. ILECs remain dominant carriers in the provision of switched access services. The data provided in the petition is outdated and not applicable to every area. Although wireless and broadband technologies continue to experience growth, not every customer currently has access to these options. ILEC carriers remain the most reliable, and in many cases the only option for customers in rural and underserved areas. (Docket 13-3, MPSC Comments filed February 22, 2016, at p. 7).

Sprint and the Michigan Commission correctly identify the flaws in the USTelecom Petition and why the Commission is likely to reject it.  There simply is no denying the terminating monopoly ILECs maintain for the access customers.  Moreover, as the number of customers decline, the Commission is apt to hope the problem resolves itself rather than taking any controversial action to change the status of switched access rates that could result in yet another multi-year court battle.  This case is a very uphill battle for ILECs.

By Andy Regitsky, CCMI