AT&T’s Stephens: FCC’s special access proposal is flawed, but we’ll work through it

FCC headquarters

An AT&T executive says that while the FCC’s business data services (BDS) proposal contradicts the facts about the competitive nature of the market, the telco will find a way continue operating regardless of what conclusions the regulator makes. 

John Stephens, CFO of AT&T, told investors at the Bank of America 2016 Media, Communications & Entertainment Conference that the impact of the proposed regulations will be on lower-speed circuits below 50 Mbps -- a trend that’s shifting to 100 Mbps and above.

“Customers are seeing a need for speed and they’re buying up into higher categories anyway,” Stephens said. “While we don’t like this, and we believe it is the wrong policy for investment in the country’s infrastructure, we will manage through this in the same way we managed through other regulatory issues.”

Although AT&T has a number of customers that use sub 50 Mbps wholesale Ethernet services, the telco would not see any issues until the end of each contract.

“We do have some Ethernet sales below 50 Mbps, but we have a lot of contracts that go on for three, four or five years so the impact of that would have to come after those contracts expire,” Stephens said.

AT&T occupies an interesting position in the BDS market.

The telco offers a host of wireline services within its own region where it has facilities to other wholesale customers while purchasing higher speed services to complement its own reach outside of its own territory. Its wireless division also purchases last mile circuits of 100 Mbps and above from other telcos and competitors to backhaul network traffic.

“We buy a lot of access from people as well as sell it so there’s some offsetting cost savings when you’re in that situation,” Stephens said. “The ones that it may impact more are the ones that don’t buy much but sell a lot.”

What has been a key concern for AT&T and other telcos is a claim that the statistics the FCC gathered about BDS in 2013 don’t support their argument for reform.

According to AT&T, a large majority of buildings it serves in its territory can get access to multiple BDS providers.

“An FCC study done in 2013 showed that 85 percent of the buildings in the United States had more than two business data service providers,” Stephens said. “Where we operate, we think the number is about 85 percent and when you include cable and other alternative providers, the number is even higher.”

If the FCC does move forward with regulating the BDS market, AT&T is also concerned that it could chill new network investments. “Anytime you have regulatory pain, you reduce investment and that’s not what we need in this industry,” Stephens said.

Joining fellow telcos CenturyLink and Frontier, AT&T has been an outspoken critic of a joint BDS proposal made by Verizon and industry advocacy group Incompas.

In a June 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.

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