CenturyLink, FairPoint and Frontier protest special access changes, say it will impact rural market growth

CenturyLink (NYSE: CTL), FairPoint and Frontier banded together in protest of the FCC's passing of a proposal to realign the special access market, saying that it would have a detrimental effect on how service providers address Tier 2 and Tier 3 markets.

The trio said in a joint statement that FCC's move breaks precedent from its light touch regulatory approach that drove new competition in the business services and wholesale markets.

Each of these service providers provide special access services to CLECs and other competitors in their wireline territories. 

"The FCC's data shows that its 20-year old deregulatory policy for business data services has been very successful, fostering competitive entry by cable companies and others, network investment, technological advances and much lower prices for capacity," the telcos said in a joint statement. "Those hoping to be connected to the digital economy will be best served if the FCC continues this success story, but we are concerned today's rule making proposal will turn back the clock and shut the door on business data investment and competition in much of suburban and rural America."

Additionally, the three telcos said that by adopting a technology neutral structure, service providers in rural areas will be fearful of making upgrades.

"Regulatory rate reductions for broadband data services in the highest cost areas will prevent or slow competitive growth and make it difficult for current providers to continue with planned upgrades and future investments," the telcos said. "Ironically, the main beneficiaries of such rate cuts would be large wireless providers that sold off their rural properties and can well afford to pay the actual cost of network investments that they choose not to make themselves."

In a 3-2 vote along political party lines that saw Chairman Tom Wheeler siding with commissioners Jessica Rosenworcel and Mignon Clyburn, the regulator voted on a proposal that would take a technology neutral regulatory approach to special access services.

The FCC's special access proposal is seeking public comment on reforming and modernizing its rules based on four principles:

·         Competition is best, but where competition does not exist, market conditions must not be allowed to stifle the ability of business customers to innovate and compete;

·         Technological neutrality should be at the core of any new regulatory framework;

·         Policies should remove barriers to the transition to new technologies; and

·         Rules should be crafted to meet the needs of both today's and tomorrow's marketplace.

Earlier this month, Wheeler laid out his draft Further Notice of Proposed Rulemaking (FNPRM) proposal in a blog post.

With the FNPRM, Wheeler proposed four key tenets for new special access regulation: identifying competitive markets, a technology-neutral approach, encouraging transitions from TDM to IP, and addressing current, future transitions.

Additionally, the FRNPM sought comment from all interested parties about how best to determine where competition does and does not exist. That includes competition among products, the supply and ability to supply BDS in specific geographies, and the needs of different classes of customers.

Wheeler has set a goal to have the FCC adopt a final order this year -- one that will face legal challenges from these three providers as well as AT&T (NYSE: T) and cable providers such as Comcast  (NASDAQ: CMCSA) and Charter Communications (NASDAQ: CHTR).

Comcast and Charter have been just as critical of the FCC's proposals. The two cable operators said during their respective first quarter 2016 earnings calls that the FCC will impose rules that would make it more challenging for newer business service providers like cable operators to build out their network to expand their service presence.

Taking a slight divergent path from these providers is Verizon (NYSE: VZ), which developed a joint proposal with INCOMPAS to regulate special access services, signaling that at least one large ILEC wants to come to an agreement following a decade long debate.

For more:
- see this joint statement

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