Offering greater flexibility to deliver new cloud and optical services to businesses and consumers, it should be no surprise that the large ILECs like AT&T (NYSE: T), CenturyLink (NYSE: CTL) and Verizon (NYSE: VZ) are keen on migrating off their legacy copper and TDM networks to IP and fiber.
However, CLECs and their small to medium business (SMB) customers are concerned whether ILECs will provide equivalently priced access to IP services. Also, will they provide enough notice when they want to retire copper?
FCC Chairman Tom Wheeler's recent proposal addresses how ILECs can't jack up the prices as they transition from TDM to IP-based Ethernet services. Under his proposal--one that will be discussed during the FCC's meeting on Aug. 6--ILECs would be required to offer wholesale services that are "reasonably competitive to those of legacy services on an interim basis."
Wheeler's plan also addresses the copper retirement issue. Business customers would be given six months' notice, while residential customers would get three months' notice before copper facilities are shut down.
Chairman Wheeler's proposals were met with a mixed response.
On one hand, CLECs and industry forum groups, including BT, Level 3, Windstream, and COMPTEL, praised the FCC's action.
Level 3, for one, is no stranger to IP and fiber. Having built a network from scratch, the service provider further enhanced its ability to serve more multisite business customers when it purchased tw telecom. But even though the acquisition enhanced Level 3's on-net fiber reach, that network can't reach everywhere.
"Chairman Wheeler's proposal will help ensure that the network transition won't leave customers behind," said Joe Cavender, FP and assistant general counsel for federal affairs at Level 3 Communications. "It's an important step in promoting broadband choice."
Local businesses like Newport, Ore.-based Dolphin Real Estate have also been voicing their concerns about wholesale rates to the FCC. The company said that they switched from a national provider to a smaller CLEC called Coast Com due to poor customer service they got from a large national provider.
"By keeping the marketplace open for more competition, the FCC will help ensure that businesses like ours have the power to choose the broadband provider that is the best fit for our needs and growth," wrote Dolphin Real Estate in a letter to the FCC.
Alternatively, USTelecom and ILECs like AT&T argued that the FCC's mandate "that new services be reasonably comparable to legacy services threaten to complicate and delay the transition without providing any significant counterbalancing benefit."
Gaining access to competitive wholesale access rates is something for which Windstream, a company that acts as both a CLEC and an ILEC, is an active advocate. The service provider said in a recent FCC filing that AT&T's IP transition will hurt small and medium businesses if it is allowed to raise rates for Ethernet services.
In response to Windstream's proposal, AT&T cited how the FCC granted ILECs forbearance from regulating Ethernet services in 2005, and noted the competitive nature of the Ethernet market.
AT&T pointed out how Level 3 surpassed Verizon on Vertical Systems Group's Ethernet Leaderboard, which measures port shares sold. Despite its aggressive fiber builds into new areas, including most recently Greater Spokane, Wash., and Idaho, Level 3's network does not reach everywhere. At the same time, three of the largest cable operators--Cox, Time Warner Cable and Comcast--have been making gains. Even with all of these choices, none of them have the same ubiquity as an ILEC, and will have to complement their reach with wholesale agreements.
In tandem with the IP transition, copper retirement is another issue that is a concern for CLECs, particularly as it could potentially leave an SMB without service if there's not enough time to transition to an alternative service medium.
A number of CLECs have complemented their fiber reach by leveraging the ILECs' copper networks for two purposes: traditional voice services and Ethernet over Copper.
XO Communications told the FCC an ILEC should provide one year's notice when it decides to retire copper facilities in a certain area. It said that the current 90-day notice process could potentially impact a business that purchases an EoC or similar copper-based service.
Verizon, which has been migrating a number of its residential copper customers off of copper and onto fiber, responded in their own filing that the one-year notice would delay their IP transition while giving a competitive advantage to cable operators that might want to lure area customers.
While there are new competitive choices, they still lack the ubiquity of the telcos' network. This means that in order for a CLEC to fulfill multisite business service requests they need to get last mile access in places where it's not feasible to build out their own network facilities.
In order to maintain true competition and choice in the business services space, ILECs need to strike a compromise with their CLEC competitors. Without ensuring competitive choice, the real losers in these transitions are the small businesses that need communications services to run their daily operations.--Sean