Sprint, other competitive carriers rail against AT&T's special access rate increase

AT&T's (NYSE: T) decision to raise special access rates is drawing fire from a group of wireless operators and CLECs that say the move is an abuse of its dominant position.

Competitive providers say that ILECs AT&T and Verizon (NYSE: VZ) collectively own about 80 percent of the special access market.  

Earlier this month, AT&T announced that it was going to stop offering extended contracts on services such as T1 and DS-3 circuits and the discounts that were included in those contracts. This prompted a group of competitive service providers, including Sprint and tw telecom (Nasdaq: TWTC), wrote a letter to the FCC that their action was an abuse of their standing in the special market segment. 

Seven competitive telcos, including CBeyond (Nasdaq: CBEY), EarthLink (Nasdaq: ELNK), Level 3 Communications (NYSE: LVLT), MegaPath, Sprint, and tw telecom, filed a joint letter with the FCC protesting AT&T's plans.

"By unilaterally forcing these customers onto shorter term plans, AT&T is effectively raising its rates by eliminating the additional discounts it has issued when customers commit to longer term plans," said the service providers in a joint letter to the FCC. "These lost discounts will result in substantial price increases for special access customers."

Sprint, which uses special access circuits to deliver its host of IP-based services to its business customers and for wireless backhaul, said that AT&T's proposed price moves "will increase special access prices by as much as 24 percent."

Beginning on Nov. 9, AT&T will no longer will offer new term plans longer than 36 months for tariffed TDM services, including DS1, DS3, analog private line, and DS0 services.

AT&T spokesman Michael Balmoris told the Wall Street Journal that it currently offers larger discounts for long-term contracts, but it is stopping that practice because it plans to phase out TDM services by 2020. 

The telco has been transitioning more of its wireline network to IP via its $14 billion Project VIP initiative. However, it still needs the FCC's permission to stop offering TDM-based services.

Similarly, Verizon's proposal to raise special access rates by 6 percent last year drew fire from the same service provider. Verizon later decided not to go forward with the price increase.

Over the past year, the FCC has been moving ahead with its own revisions on special access. In September, the regulator released its revised data request on the Report and Order and Further Notice of Proposed Rulemaking providing instructions covering special access. It will use it to see if it has to make any changes to its pricing flexibility rules.

For more:
- WSJ has this article (sub. req.)
- here's the FCC filing (.pdf)

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