AT&T knocks Windstream's request for equivalently-priced wholesale Ethernet access services

AT&T (NYSE: T) says the FCC should deny Windstream's request to impose "interim" equivalently-priced IP special access service rates for Ethernet as legacy TDM services are phased out, because the market is highly competitive and the commission would have reverse a number of existing rules.

The service provider, which is in the process of migrating more of its customers to Ethernet circuits, wrote in an FCC filing that in order to alter the Ethernet rates, the regulator would have to "reverse" the forbearance it gave to telcos deploying Ethernet in 2005 while satisfying the standard of Section 205 for these services.

"The Commission does not remotely have the record to reach either conclusion, and it would be especially inappropriate to jump the gun and impose such ratemaking measures before it has even considered the data it is collecting in the special access proceeding," wrote AT&T in its filing. "Before addressing the legal defects in these proposals for interim rate regulation, it should be emphasized that Ethernet services are among the least appropriate candidates for any sort of rate regulation, interim or permanent."

AT&T wrote that if the FCC were able to "reverse forbearance at all, it would have to conduct a rulemaking and affirmatively find that the re-imposition of regulation was warranted on today's facts," adding that "proposals such as Windstream's face a further legal hurdle: even if the Commission's prior findings of forbearance could be 'reversed,' the Commission could not require ILECs to provide an Ethernet service at the rates and terms of the pre-existing TDM service without complying with the stringent standards for a prescription under Section 205."

Besides the legal issues, AT&T points out that a growing number of competitive providers are offer plenty of Ethernet choices. The telco cites Vertical Systems Group's 2014 U.S. Carrier Ethernet Leaderboard where there were eight service providers with port shares that exceed 5 percent, including three ILECs, two CLECs, and three of the of the largest cable companies, including Time Warner Cable (NYSE: TWC), Cox and Comcast (NASDAQ: CMCSA).

During this period, Level 3, a CLEC, surpassed Verizon (NYSE: VZ) as the second largest Ethernet provider in the U.S. measured by port share. What helped Level 3 achieve this feat was its acquisition of tw telecom. Meanwhile, Comcast was recently named the fastest growing Ethernet provider on Vertical Systems Group's U.S. Carrier Ethernet Leaderboard for the second consecutive year and "is well positioned in 2015 due to its extensive fiber network footprint."

AT&T said that "in the face of this intense and growing competition, re-regulation of Ethernet services is wholly unwarranted," adding that "even if this were not the case, the Commission could not lawfully adopt Windstream's interim pricing proposals or anything similar."

Echoing a similar sentiment touted by the USTelecom Association and fellow ILEC Verizon, AT&T said that "there is no basis to impose rate regulation on these extremely competitive services after almost a decade of forbearance, and any such regulation would inevitably retard investment in broadband facilities."

Windstream asked in a separate filing with the FCC last week to enact reform and grant its Petition for Declaratory Ruling regarding the continued availability of unbundled DS1 and DS3 capacity loops after an incumbent local exchange carrier makes an IP or fiber transition.

The service provider, which acts as both an ILEC and a CLEC which has to purchase last mile facilities from AT&T and other telcos to serve business customers, said that AT&T's IP transition will hurt small and medium businesses if large telco providers are allowed to raise rates for last mile network services.

AT&T and Windstream's filings come about as the FCC moves forward with its review of the special access market and copper retirement issues, which they will take up during their Aug. 6 meeting. The FCC last week issued a proposal that there should be protections to ensure that ILECs can't jack up prices on next-generation IP services. A number of CLECs and their SMB customers that depend on lower-speed TDM-based T-1 and related services face uncertainty as incumbent carriers prepare to stop offering some of these services.

For more:
- see this FCC filing (PDF)

Related articles:
US Telecom says FCC's IP, copper retirement proposals will slow migration
FCC proposes extending copper retirement, sets IP transition protections for consumers, businesses
Windstream says SMBs will be hurt if AT&T raises special access prices in IP transition
Windstream to FCC: Competitive choice should not be reduced in IP transition
COMPTEL, industry orgs ask FCC to protect competition in ILEC IP transition

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