FCC looks to regulate middle-mile connections

Advocates of special access reform say AT&T and Verizon are charging too much

The U.S. Federal Communications Commission will look into new regulations of middle-mile broadband connections used by many businesses and owned largely by AT&T and Verizon Communications, the agency said.

FCC Chairman Julius Genachowski, on Monday, circulated a proposal to reform the rates of so-called special access services, the large-pipe connections used by businesses and mobile carriers to connect to the Internet.

Verizon and AT&T, which control by some estimates 80 percent of special access services in the U.S., have disputed the need for new regulations by saying the special access market is increasingly competitive. But several groups, including Sprint Nextel, Public Knowledge and XO Communications, have long complained that AT&T and Verizon are charging too much.

"There is widespread agreement that the existing framework is broken, which is why we propose to temporarily suspend consideration of pricing flexibility petitions pending development of a new framework," an FCC official said in a statement. "Our reforms will aim to protect competition; ensure access to robust, affordable broadband for small business, mobile providers, and others; and eliminate regulations where evidence of competition exists."

The NoChokePoints Coalition, representing several groups calling for special access reform, cheered the FCC's announcement.

"This action would have a meaningful and positive effect on the economy, perhaps most importantly for America's small businesses and anchor institutions, both of which depend on these critical high speed broadband lines," the group said in a statement.

If the FCC returns special access rates to reasonable levels, it will "generate billions of dollars of savings across the broadband economy, will spur investment and jobs, improve wireless deployment and enhance rural broadband coverage at a time we need it most," the group added.

AT&T questioned the need for changes. About 95 percent of special access services are slow 1.5M bps connections, Bob Quinn, AT&T's senior vice president for federal regulatory affairs, wrote in a blog post.

These "legacy, copper-based" services needs to be retired as carriers move to an all-Internet Protocol infrastructure, Quinn wrote.

"Apparently, we are going to go backwards and try to figure out the perfect way to price-regulate a technology that is fast becoming obsolete," he wrote. "Instead of creating a path to fiber, significant infrastructure investment by all carriers, job creation and achieving the nation's broadband goals, we are going to instead pursue policies that will result in less fiber, less infrastructure investment, less job creation, and less broadband. It's not that we haven't pulled this kind of transformation before."

Representatives of Sprint and NoChokePoints disputed AT&T's suggestion that 95 percent of special access services are 1.5M bps connections. Faster services are also part of special access, they said.

Randolph May, president of free market think thank the Free State Foundation, called efforts to regulate special access "wrong headed."

Other companies are building networks to compete with the large special access providers, he said. "Competitors have been seizing, and continue to seize, opportunities to enter the 'special access' market segment and build out new network facilities -- even though they are clever enough not to market their competitive services under the 'special access' moniker," May wrote in an email. "If the FCC were to reverse course and require the incumbent providers to reduce the rates for their special access services, the incentive for competitors to continue investing in the build-out of new facilities would be suppressed."

But U.S. Representative Mike Doyle, a Pennsylvania Democrat, praised the FCC for tackling special access rates. "This is not just about a battle between carriers," he said in a statement. "This is about the pocketbooks of consumers and small businesses. They need all the relief they can get."

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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Grant Gross

IDG News Service
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