FCC suspends price flexibility in special-access order

Special access refers to the high-capacity broadband lines that are dedicated to providing businesses, banks, hospitals, universities and other large private entities a direct line to the Internet backbone. Businesses also rely on special-access lines to handle their large volume of phone connections. 

The commission is expected to issue a data request to backhaul Internet providers such as AT&T, Verizon and Quest within the next 60 days so it can begin its analysis. The order was adopted on Aug. 15 but was released publicly on Wednesday.

Sprint and smaller wireless carriers, such as Cricket and tw telecom, lease capacity on special-access lines so they can provide phone and Internet services directly to large businesses and other private entities. These carriers argue that the current system lets AT&T and Verizon charge exorbitant prices for access to these broadband lines.

Verizon and AT&T control roughly 80 percent of the special-access market, according to the NoChokePoints Coalition, which counts Clearwire, Sprint and U.S. Cellular as members.

The current special-access rules include a set of triggers that determine whether there is a healthy amount of competition in a special-access market. Owners of special-access lines, such as AT&T and Verizon, get pricing flexibility for a certain geographic area when they meet these triggers. That means they are not limited by a price cap when determining how much to charge wireless carriers for access to their broadband infrastructure.

Free Press, Public Knowledge and the NoChokePoints Coalition have argued that these triggers do not adequately measure competition in a certain area. They say that AT&T and Verizon can easily meet these triggers in some major cities and therefore charge smaller carriers steep prices to lease capacity on these broadband lines.

AT&T, on the other hand, has fought for regulatory relief from the price caps in the current rules.

In their dissents, the two Republican commissioners argued that the FCC was jumping the gun by suspending price flexibility for special access before it completed its analysis on market competition.

"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," Commissioner Robert McDowell, a Republican, wrote in his dissent. "In doing so, the majority chose to lay its procedural path backwards."

Pai struck a similar tone in his dissent, saying the FCC "has reversed the steps that a data-driven agency should take."

AT&T and Verizon also spoke out against the order.

"The FCC is placing the cart before the horse by suspending the existing special access rules before receiving and analyzing the data submissions," said Bob Quinn, senior vice president of federal regulatory matters for AT&T. "If, as the FCC itself stated earlier this year, it does not have the data to support ‘claims that special access rates are unreasonable,’ then suspending the existing triggers seems premature."

Donna Epps, vice president for federal regulatory affairs at Verizon, echoed that argument, saying the FCC "should have collected the data it repeatedly has said it needs to evaluate the marketplace" before taking any action.

"There are many providers … that compete vigorously with special access," Epps said. "Given this intense competition, any efforts to impose new pricing regulation are unjustified and will depress investment in these networks so critical to our economy."

House Energy and Commerce Committee leaders Reps. Fred Upton (R-Mich.) and Greg Walden (R-Ore.) expressed disappointment in the FCC's decision. At a recent hearing, they said Genachowski never mentioned that the commission would take action before finishing its data collection.

"The FCC has a responsibility as an expert agency to justify its actions with data before intervening in the status quo," the two Republican lawmakers said in a statement.

But there were several groups that cheered the special-access order's approval, including several House Democrats and Sprint. 

"The [FCC] suspended the use of flawed rules that have contributed to the unreasonably high rates for critical special access services. 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," said Vonya McCann, senior vice president of government affairs at Sprint Nextel.

“As Chairman Julius Genachowski said earlier this summer, the current framework for special access is ‘not working'. We agree," McCann added.

Free Press Policy Director Matt Wood called the decision a "welcome step towards reevaluating the system and preventing the worst abuses by dominant incumbent providers."

Reps. Henry Waxman (D-Calif.), Mike Doyle (D-Pa.) and Anna Eshoo (D-Calif.) all lauded the order.

"For years, competitive carriers, wireless service providers, Fortune 500 corporations, small businesses and many others have had to depend on a special access market that is broken," Eshoo said in a statement. "The FCC’s action provides a path toward meaningful reform, ensuring that in the process, the agency collects the necessary data to support a robust, competitive marketplace.”

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