Telecom Sector Heavyweights Brawl Over $40 Billion Special Access Market

Wednesday, March 2nd, 2016

In 1999, the Federal Communications Commission moved to deregulate the so-called special access market, granting pricing flexibility to incumbent phone carriers in areas where competitive triggers were met.

But a full 20 years after President Clinton signed the Telecommunications Act of 1996, competitive telecommunications providers that were born out of the law are still fighting with the likes of AT&T and Verizon over “last mile” wholesale access to their incumbent networks.

The outcome of the fight over future regulations – or deregulation – in the $40 million special access market could impact the prices charged by channel partners that sell telecom and IT services to American businesses on behalf of competitive carriers, such as Level 3 Communications and XO Communications.

The FCC, which has collected an unprecedented amount of data in a years-long special access proceeding, has described special access as “a wholesale data service widely purchased by businesses and institutions that provides dedicated, guaranteed transmission of high volumes of critical data.”

It has also provided hints as to its aims: “After a comprehensive evaluation of the relevant data, the FCC will look at revising its rules to provide relief from regulations in those geographic areas where a robust and competitive special access market exists,” the agency explains on a website.

Over the last 15 years, the CLECs (competitive local exchange carriers) that serve businesses large and small have invested billions of dollars in high-speed networks that traverse cities and connect to gas stations, banks, financial centers and other buildings. Under 1999 “pricing flexibility” rules, the FCC used its authority to forbear from regulating IP-based Ethernet services, granting AT&T, CenturyLink and Verizon relief from many requirements in the 1996 Telecom Act, explained Mike Mooney, Level 3’s senior vice president and general counsel for regulatory policy, in an interview last year.

But 17 years later, the CLECs still aren’t everywhere and are reliant to varying degrees on the incumbents’ special access services, including DS1 and DS3 circuits. According to Windstream Communications, Level 3 and XO serve 30,000 and 4,000 commercial buildings, respectively, but that is just a fraction of the estimated 3.5 million business locations nationwide that house more than one corporate entity, the FCC noted in an order last year.

“CLECs have invested billions and billions of dollars in network but in many cases for these small customers it’s not economic to build the last mile,” Eric Einhorn, Windstream’s senior vice president of government affairs, told Channel Partners. “The CLEC isn’t going to be able to support business access to that gas station without leasing the last mile to the incumbent.”

But AT&T said the data collected by the FCC not only counters CLECs’ conclusions that the FCC prematurely deregulated the special access market in 1999, it demonstrates the commission “did not go far enough.”

“Specifically, the data shows two things,” wrote Bob Quinn, AT&T’s senior vice president, federal regulatory, in a blog. “First, that facilities-based competitors are serving 95 percent of all MSA census blocks (on average, about 1/7 of a square mile in an MSA) nationally where there is demand…

Channel Partners: Telecom Sector Heavyweights Brawl Over $40 Billion

By Josh Long, Channel Partners