AT&T postpones special access rate increase following customer protests

AT&T (NYSE: T) is putting plans on hold to increase charges for special access services after facing an outcry from its wholesale competitive carrier customers.

Earlier this month, AT&T announced that it was going to stop offering extended contracts on services such as T1 and DS3 circuits and the discounts that were included in those contracts. A group of competitive service providers, including Sprint (NYSE: S) and tw telecom (Nasdaq: TWTC) wrote a letter to the FCC saying that its action was an abuse of their standing in the special market segment.

Competitive providers said that AT&T and fellow RBOC Verizon (NYSE: VZ) control about 80 percent of the special access market. These connections are used by competitive providers to connect their headquarters and remote offices, and by wireless operators for backhaul where IP-based services such as Ethernet are not available today.

Wholesale customers received a new letter from AT&T on Friday saying they would hold off on implementing the new charges for a month so they could "address questions and concerns that customers have raised."

Under the current rules, AT&T is obligated to tell the FCC of any changes it makes to its special access pricing scheme. However, the changes will go into effect automatically if the regulator does not decide to review them after 15 days. The service provider said it would tell the FCC on Nov. 25 of its plans, adding that the new pricing would take effect on Dec. 10.

The telco said that its recent move to eliminate long term contracts is part of its process to migrate its TDM-based network to IP by 2020.

"The IP network will be modern--more efficient, more versatile, and more resilient than a traditional TDM network," AT&T wrote in a letter to its customers. "Eliminating long-term commitments to TDM services is a necessary part of that modernization process."

Although service providers like Sprint have found utility with IP-based Ethernet services for both its larger business customers, the reality is it is not available everywhere.

"As a country, the IP transition is underway and more and more Ethernet will be used and we're thrilled that the ILECS like AT&T are updating the network, but the problem for us and the country is there's always going to be a group of customers who will have no need for big capacity Ethernet," said John Taylor, Sprint's spokesman on federal and state public policy issues, in an interview with FierceTelecom. "They will always just need the same old DS1, DS3, or OC-N they have always needed, so why should they be forced to buy 100 Mbps Ethernet circuit and pay for capacity they'll never need or use?"

A similar situation exists on Sprint's wireless backhaul network.

As part of its Network Vision initiative, Sprint has made the use of fiber and IP-based Ethernet its network service choice, but there are still many places it serves where today it can't get these services.

"For wireless, Ethernet is a better alternative for wireless backhaul, where it's available, because we're a high capacity customer and we actually need the bigger pipes," he said. "The problem is even after we modify things with Network Vision we won't be able to deploy Ethernet everywhere because wholesale Ethernet is not available everywhere."

For more:
- WSJ has this article (sub. req.)

Related articles:
Sprint, other competitive carriers rail against AT&T's special access rate increase
FCC takes next step with special access reform
FCC launches special access data collection initiative
BT Global implores FCC to take action on special access reform

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