FCC Suspends Special Access Deregulation

Will seek data on competitiveness of market in business broadband

By John Eggerton -- Broadcasting & Cable, 8/22/2012 8:28:38 PM

In a 3-2 party line vote, the FCC has suspended its current benchmarks for deregulating the rates of special access (business) broadband services while it better determines where there is competition for that service.

The "better determining" part will be via a mandatory data collection from providers, which the FCC promised it would launch within 60 days. The FCC has tried voluntary data collections, but some players were no-shows.

The item was voted Aug. 15, but not released until Aug. 22.

"Based on the record and the undisputed finding that legacy regulations are not working as intended, we temporarily suspend outdated rules that not only allow incumbent carriers to raise prices in the absence of competition," said FCC chairman Julius Genachowski, "but also deny them the flexibility to lower prices in the presence of competition. We do this as we determine what permanent rules would best promote a healthy competitive marketplace."

The FCC vote means actions on petitions for deregulation under the current benchmarks have also been suspended. The commission said the suspension was temporary, but one commissioner pointed out that a previous "temporary" move by the FCC stretched to over three years. "By all appearances, the majority is wrapping its decision in the protective cloak of ‘interim' status merely to increase its odds of success during the inevitable appeal," said senior Republican Commissioner McDowell in his dissent.     

Under FCC rules, telcos are required to lease special access lines to competitors. But the FCC deregulated AT&T and others' special access lines in 2009 in cases where competitive triggers are met.

Those lines are the "last mile" dedicated broadband lines to businesses, which incumbent local exchange carriers like AT&T dominate. By contrast, residential customers can generally choose from cable or phone lines for their service.

The commission over a dozen years ago removed "dominant pricing" regulations, while continuing to regulate interconnection and reasonable pricing per its Title II common carrier regulation of Independent Local Exchange Carrier (ILECs). Ever since, the commission has been under pressure from public interest groups to re-regulate special access.

The two dissenting Republicans were in agreement that the commission was taking a ready, fire, aim approach by suspending the deregulatory triggers before it had the data in hand on market competitiveness.

"Today, the majority has opted to suspend a thirteen-year-old special access regulatory framework without an adequate evidentiary record or market analysis, both of which are necessary to make such a sweeping rule change," said McDowell. "In doing so, the majority chose to lay its procedural path backwards. Due to such glaring deficiencies, I have no choice but to respectfully cast a dissenting vote."

McDowell has long called for a comprehensive study of the marketplace before the FCC acted, if it needed to act.

In his dissent from the decision, Republican Commissioner Ajit Pai called it a case of "Sentence first -- verdict afterward," borrowing from the Queen of Hearts in Alice and Wonderland. The sentence, in this case, is suspending the current triggers under which telcos can seek relief, then conducting the mandatory data collection -- which Pai supports -- to determine the competitiveness of the market.

"The commission has reversed the steps that a data-driven agency should take," he said. "As a result, today's action appears consistent with the Administrative Procedures Act [which prescribes the rules for agency decision-making] only when viewed through the proverbial looking glass."

Pai adds that the decision is more troubling for the signal it sends of dismantling a bipartisan deregulatory framework launched under President Clinton and preserved under President Bush, only so that the FCC can "travel down the rabbit hole of re-regulation," with a stop along the way to re-regulate fiber.

The Republican chairs of the House Energy & Commerce Committee and its Communications Subcommittee were not pleased with the commission decision.

"The FCC has once again handed down a decision without providing sufficient evidence that action is needed," they said in a joint statement. "The decision violates good process and is difficult to square with Chairman Genachowski's previous statements about how this issue would be addressed....The FCC has a responsibility as an expert agency to justify its actions with data before intervening in the status quo. Chairman Genachowski has said that the House-approved FCC Process Reform Act is unwarranted. Actions such as these provide further evidence to the contrary."

The FCC had plenty fans, as well.

"The FCC's action to suspend its pricing flexibility triggers is an appropriate and very responsible decision," commented Rep. Mike Doyle (D-Pa.). "There is widespread agreement that the triggers don't adequately measure effective competition, and the agency certainly should not base any of its rules on inadequate measurement tools. This decision is an important step toward correcting the FCC's broken special access regime, and I applaud Chairman Genachowski's determination to make it happen

"Suspending operation of the flawed pricing flexibility triggers for special access services is an important acknowledgement by the FCC that the current special access regulations are broken," said the Broadband Coalition. "We plan to work with the Commission as they tackle comprehensive special access reform which will benefit businesses across America that depend on us for affordable, innovative and high quality broadband services."

"Today, the Federal Communication Commission suspended the use of flawed rules that have contributed to the unreasonably high rates for critical special access services," said Sprint Nextel senior VP Vonya McCann. "We applaud the Commission for addressing this aspect of the failed special access market, an important step at a time when the American economy needs it most."