[IP] more on FCC Approves of Mergers
Begin forwarded message:
From: "Levine, Hank" <hlevine@xxxxxxxxxx>
Date: November 1, 2005 4:46:14 PM EST
To: dave@xxxxxxxxxx
Subject: RE: [IP] FCC Approves of Mergers
For IP, if you want:
One odd thing about the FCC's approval of the mergers was the
condition requiring AT&T and MCI to stabilize their rates for
wholesale special access services for a couple of years.
Loss of competition in the special/dedicated access market was a
major worry in connection with the mergers, because the dedicated
pipes (usually DS-1’s or DS-3’s) connecting enterprise customer
locations to the public telephone network or the Internet are
‘bottleneck’ facilities provided on a near-monopoly basis by
incumbent local exchange carriers. As a result of that monopoly,
special access rates (unlike other telecom rates) have actually been
rising in recent years, and the LECs’ rates of return on special
access are in the 40-80% range. MCI and AT&T had each built their
own facilities to a few thousand commercial buildings in the last
decade [only a few percent of the total, but better than nothing],
which means that without conditions the mergers would have led to a
substantial diminution of what little special access competition
there is in the Verizon and SBC footprints.
DOJ and the FCC dealt with this in a couple of ways, like requiring
the sale of IRUs to competing carriers. The consensus among users is
that these may have been better than nothing but weren’t very good.
The “safeguard” that makes the least sense, however, is the one noted
above, if it means what it seems to mean.
Local exchange carriers sell most special access to interexchange
carriers, who in turn sell it to end users. So requiring
stabilization of LEC rates for wholesale special access services
makes some sense. But AT&T and MCI sell most of the special access
they buy from the LECs to end users, so requiring them to stabilize
only their rates for wholesale services doesn’t do much for
enterprise customers, if the use of “wholesale” in the press release
means rate stabilization is limited to AT&T’s/MCI’s IXC and CLEC
customers.
You could argue that if these few remaining smaller carriers are
assured of access at decent rates this will ‘discipline’ AT&T/SBC and
MCI/Verizon, but aside from Sprint and maybe Qwest the smaller
carriers have essentially zero penetration (beyond commodity voice
minutes) in the enterprise market. And the major carriers use
interconnection fees with exotic names [AC, ACC, COC] to prevent
customers from buying special access from carrier A and using it to
transport traffic to Carrier B’s network. So AT&T’s and MCI’s prices
for “local private line services,” i.e., re-sold special access, are
the ones that matter to enterprise customers. Why deny rate
stabilization to the very customer group that needs it most?
“Wholesale” has often been used in sloppy ways, though, and the FCC
has been guilty of that sloppiness in the past. Maybe the reference
to “wholesale” is meant only to indicate special access purchased
from LECs for resale to high-volume customers.
And here’s the kicker – because of the FCC’s ‘sunshine’ rules, until
the full text of the FCC’s order comes up, you’re not allowed to call
up and ask.
Hank Levine
Levine, Blaszak, Block & Boothby, LLP
2001 L Street, NW., Suite 900
Washington, DC 20036
* (202) 857-2540
* Fax (202) 223-0833
* hlevine@xxxxxxxxxx
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