Coalition adds special access to broadband agenda

The debate over the reform of special access regulation heated up considerably this week with the launch of a new group called the NoChokePoints Coalition and the immediate response to it from USTelecom.

NoChokePoints includes a number of competitive and wireless carriers, including Sprint, T-Mobile, XO Communications, Covad Communications, Cbeyond and Clearwire as well as consumer advocate groups and business user groups. The group is claiming that special access rates – the rates paid by carriers and others to use incumbent facilities to reach buildings or cell site facilities – are so high that they are interfering with broadband deployment.

“We have a new administration and a new FCC, and we hope they are pro-competitive,” said Lisa Youngers, vice president of federal affairs for XO Communications (OTC: XOHO). “We think the time is right for them to examine this issue. It was teed up in front of the previous commission for quite a while. It makes sense now because the FCC is charged with forming a national broadband plan, and any national broadband plan has to include special access reform. Access to those last-mile facilities is critical infrastructure and therefore a key to our economic recovery.”

The NoChokePoints Coalition is a much broader collection of voices, Youngers said, including those of business and consumer groups. One such group, the Ad Hoc Telecom Users Committee, claims that there is much less choice or competition than current incumbents are claiming. As a result, special-access prices are not declining as costs for the service go down, said Colleen Boothby, attorney with Levine, Blaszak Block & Boothby, LLP.

“The prices for special access went up from 2001 to 2005, then the merger conditions (for the SBC-AT&T and Verizon-MCI mergers) kicked in, and there was the spotlight of public opinion, so they leveled off and have stayed there,” Boothby said. “But these are not the kind of prices you’d expect to see, given the advances in computing and fiber and all the things that make IT a cost-declining industry. Meanwhile, [incumbent] profits on special access have gone through the roof.”

Boothby said her members, some of whom buy special access direct from incumbents in addition to having it bundled into competitive service provider offerings, don’t have many choices, despite incumbent claims that cable companies, wireless companies and satellite companies are offering alternatives to incumbent fiber and copper lines. “We poll them over and over again, and except in the very dense core business districts like downtown Manhattan, they don’t have any choice,” she said, adding that most competitive service providers still have to buy their last mile access from incumbents.

USTelecom is strongly disputing the claims of the NoChokePoints group and says competitive carriers have refused to provide data to back up their claims.

“Most of this market remains under price controls,” USTelecom President and Chief Executive Officer Walter McCormick said in a prepared statement. “Those regulations have only been lifted where the FCC has determined there is adequate competition. For example, Verizon (NYSE: VZ) has, on average, nine fiber competitors in each of its top 25 markets. Additionally, prices in the high-capacity services market have come down substantially from 2001. AT&T (NYSE: T) has shown that the prices its customers pay fell by more than 20% from 2004 through the first quarter of 2007 in real inflation-adjusted terms. Finally, at the same time these companies are asking for this windfall, they are also issuing press releases touting their contracts and new offerings in high-capacity services.”

The issue of whether more data is needed may become a pivotal point – the NoChokePoints members say there is plenty of data available and that the FCC should act on reform, while incumbents are insisting that competitive service providers turn over data on their pricing as well.