Year in Review 2012: Special access reform roils telecom industry, FCC

The news: In the regulatory world, the rules for special access have taken on new meaning as more and more competitive local exchange carriers (CLECs) take a stake in the high-speed broadband business services market. Many are building their own fiber networks, but more often than not, many of their customers sit outside that network.

That's one point where special access comes in. For a price, CLECs can extend Ethernet services to off-net buildings on the last mile by connecting through an incumbent local exchange carrier's (ILEC) network. AT&T (NYSE: T) and Verizon (NYSE: VZ) own most of those networks, making them the biggest providers of special access services, although CenturyLink also plays a role as a special access provider since its purchase of Qwest in 2010.

The question being posed to the FCC is how much ILECs can charge for special access. Since 1999, ILECs have been able to seek price deregulation of special access services, which also include dedicated legacy lines from 56K to Ethernet speeds and are used by businesses for everything from credit card processing to wireless backhaul. In August, the FCC voted to temporarily suspend rules which automatically granted requests for price changes. But special access regulation is far from settled.

tw telecom, a CLEC spun off by Time Warner Inc. in 1998, is one of the providers advocating for controls on special access pricing. The carrier has about 16,000 buildings on its fiber network, said Larissa Herda, tw telecom's CEO, in a recent interview with FierceTelecom, but many of those customers have branch offices outside its network reach.

"So we have to buy services to those locations where you're never going to have competition," Herda said. "We have to be able to get those services at a reasonable price and reasonable service quality."

Herda said that while CLECs offer competitive pricing to customers, ILECs hold all the cards in special access and don't have to price competitively. "In fact, one of the biggest problems we run into with the incumbents is what we call the 'heroin drip.' The contract terms that they impose upon us, force us to buy from them and force us to buy more every year. And if you don't, you have these very, very steep penalties."

COMPTEL and its members want the FCC to protect the quality of service and help keep prices competitive.

On the other side of the argument, ILECs say they can't change or reduce special access conditions. For one thing, they are required to provide special access to competitors.

On Dec. 18, the FCC launched a data collection initiative that will pull information from every building, tower and other enterprise facility in the United States. The data will inform a later FCC review to determine if and where there is competition for special access services.

Why it matters: Opinions are split on the effect re-regulating special access will have. CLECs feel it's important to keep fees for the service low so they can remain competitive, particularly in markets dominated by incumbents with extensive legacy lines. Broadband advocates feel that artificially lowering special access pricing will hurt expansion of next-generation networks in the long run, as neither ILECs nor CLECs will feel pressured to replace the existing copper networks when costs are low.