As the FCC continues to debate the business data services (BDS) market, analysts at Wells Fargo warned that AT&T (NYSE: T) could be significantly affected if the agency eventually decides to cut special access rates.
"While T is both a net payer and receiver of special access (depending on the region), we estimate it has the highest exposure of any player in this debate if rates see a meaningful haircut given its footprint and reach," wrote Wells Fargo analyst Jennifer Fritzsche following a meeting with Bob Quinn, SVP of AT&T's federal regulatory and the carrier's chief privacy officer. "T's argument is that where faster speed connections exist -- more competition also exists (and circuit pricing is more competitive). T made the point that in a 5G world, fiber footprint needs to be very deep. If the FCC pushes hard on regulating rates in the business data services market it will make it harder to incentivize large carriers to continue pushing hard on fiber build because the economics become more gray."
Fritzsche also noted that the FCC may well make a final decision on its ongoing BDS proceeding before the November election. Fritzsche pointed out this comes as somewhat of a surprise since the FCC and other federal agencies generally avoid major actions shortly before a presidential election: "Not this one!" Fritzsche said.
The comments by Wells Fargo about AT&T come at an important time in the ongoing special access/BDS debate. Just last month, AT&T and CenturyLink took aim at the latest BDS proposal made by Verizon and Incompas, calling it nothing more than a self-serving measure. In a letter to the FCC, AT&T said that Verizon's sale of large parts of its wireline assets to Frontier and other providers means it will start buying up more special access service to deliver business services and for backhauling wireless traffic.
A week earlier, Verizon and Incompas proposed a new eight-element outline for a framework for BDS. Verizon and the industry group said that while they have not come to an agreement on all elements to implement the framework, the pair supports a common approach that can address current and future competition frameworks. Specifically, the pair proposed measuring the amount of facilities-based competitors in a census block and new pricing regimes for TDM and packet-based services, among other items.
The FCC gave the special access market a push in April when the regulator called for rules that would promote four main elements in the sector: driving competition, technology neutrality, technology transitions, and rules that address today's and tomorrow's marketplace needs.
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