In our April 18 blog item, we called attention to the fact that the FCC is hurting the industry by not addressing many of the outstanding key regulatory issues. This is especially true for the industry transition from the current Time Division Multipexed Network (TDM) to one based on Internet Protocol (IP).

This problem is especially pernicious for wholesale carriers. The Commission is on the verge of approving a highly publicized AT&T “technology transition” experiment in Florida and Alabama, but has not addressed how IP interconnection will (or will not) be regulated. The Commission has also failed to confront the issue of what wholesale IP services will be available to CLECs once TDM services such as switched and special access and unbundled network elements (UNEs) are phased out. As we have noted, it is extremely difficult for carriers to plan their transition to an IP network, when they have no idea how they will be regulated and what services will be available to them.

The Commission is well aware of the importance of these issues. In its January 31, 2014 Technology Transition Order, it stated that preserving competition, including wholesale competition,  is one of the statutory core values that must be preserved during the transition to IP. Additionally, the Commission has mandated that all transition experiments must satisfy this statutory value. That is why the wholesale industry was surprised and disappointed with AT&T proposed experiment.

AT&T failed to provide significant details regarding the wholesale services would be available to customers. For example, AT&T claimed that its proposed prices, terms and conditions for Digital Service products were not yet available. Clearly, without such information, participation in the experiment becomes problematic for CLECs and makes any results suspect  And yet, the Commission seems poised to approve the experiment without making AT&T address these issues. As we noted a couple of weeks ago, this FCC failure is putting the industry in a bigger and bigger planning hole. Finally, however, the wholesale industry is beginning to push for concrete action.  

In an April 28, ex parte presentation to the Commission, Windstream Communications (Windstream) recommended the steps it believes the Commission should take to take to address these policy uncertainties. According to Windstream,

[T] the Commission’s top priority with respect to competition should be ensuring access by competitors to last-mile facilities on reasonable rates, terms and conditions…[I]n the post-IP transition world, competitors still will need equivalent access to last-mile facilities and services to continue offering business services to millions of customers. Changing loop electronics from TDM to IP does not alter the fundamental economics of digging trenches and installing conduit and fiber. Unless CLECs can maintain wholesale access through and after the IP transition, many businesses and government entities that have chosen competitive providers because of their superior service and value will be forced to transition back to the incumbent, with no recourse when incumbent service or pricing is unsatisfactory.

Windstream (along with many other wholesale providers) call on the Commission to begin an immediate rulemaking to extend its core statutory values to actual policies. Such a rulemaking would;

ensure that incumbents do not diminish or degrade wholesale access needed to make it economically feasible for competitors to establish last-mile connections;

ban Minimum Revenue Commitments (“MRCs”) and early termination fees that penalize wholesale purchasers seeking to replace TDM services with IP services; and

clarify and limit acceptable special construction charges, which have become a key economic variable for last-mile access.

If the Commission were to approve AT&T’s experiment as is, it will be doing a disservice to the wholesale industry. Without details regarding the prices, terms and conditions of available wholesale services, and without knowledge of how these services will be regulated, wholesale customers will be forced into commercial negotiations with AT&T to purchase the services they may need to compete. This would provide AT&T with a huge advantage over its smaller competitors. While commercial negotiations may be the path the Commission ultimately chooses for the IP world, at a very minimum it should have to lawfully justify such a decision. Currently, its inaction is letting the large industry carriers dictate the terms of the IP transition debate.

By Andrew Regitsky, President, Regitsky & Associates