CenturyLink, Frontier say special access proposals from Verizon/Incompas and FCC will hurt network investments

FCC headquarters

CenturyLink and Frontier argued the FCC and the joint Verizon/Incompas special access proposals will do more harm than good to traditional ILECs by creating an unfavorable investment environment.

In an FCC filing (PDF), the pair said that the various special access proposals “do not synch with market realities and would produce results that would be deeply harmful to investment in American broadband connectivity.”

Verizon and Incompas submitted new pricing reforms and a competitive market test proposal to the FCC to consider as the regulator completes their analysis of the business data services (BDS) market in August.

After the pair submitted their initial proposal to the FCC in April, Verizon and Incompas in June outlined eight additional elements that they said provided a framework for BDS. This latest proposal builds on that framework, they said.

Due to an uncertain return on investment, CenturyLink and Frontier claimed that ILECs and other potential market entrants lack “incentive to invest in new areas.”

The two service providers cited how Google Fiber’s decision to retreat from new infrastructure deployment and lease dark fiber is an example of the “economic disincentives to invest in network infrastructure even in dense areas.”

CenturyLink is concerned that the proposal’s suggestion to cut rates by 15 percent over two years – along with 4.4 percent minus inflation annual reductions – would cause real-world harms. While much of the filing was blacked out, CenturyLink and Frontier said that thousands of CenturyLink and Frontier “union jobs are at stake.”

Besides causing harm to wireline network investment, CenturyLink and Frontier said that the FCC’s proposal will not help wireless operators enhance their 5G wireless deployment timelines.

While wireless operators operating 2G and 3G networks primarily used TDM-based DS1 and DS3 circuits, 5G network providers like Verizon will use a mix of higher speed Ethernet and dark fiber services that operators can get from a host of traditional ILECs, cable operators and competitors like Zayo.

“The backhaul market for DS1 and DS3s is shrinking dramatically and is not relevant to 5G” and “there is already extensive competition for Ethernet backhaul services,” CenturyLink and Frontier said. “Verizon has confirmed that it has migrated off of DS1/DS3 technology for Ethernet products, and its focus for 5G is on dark fiber, not BDS.”

Cable operators, in particular, have become a greater factor in the business services and wholesale services market. Complementing their own network builds, the consolidation of the cable market is also enhancing cable MSOs’ reach into business customers.

Interestingly, Charter Communications recently took over the third place in the U.S. Ethernet race, edging out Verizon in terms of port share. In August, Charter debuted on Vertical Systems Group’s Mid-Year 2016 U.S. Carrier Ethernet Leaderboard, a report that ranks Ethernet service providers based on retail port share.

What helped Charter was its acquisitions of Time Warner Cable and Bright House Communications. Through these acquisitions, Charter immediately gained a larger fiber and hybrid fiber coax footprint to target more small, medium and large businesses with Ethernet services.

For more:
- see this FCC filing (PDF)

Related articles:
AT&T, Verizon, CenturyLink special access pricing practices face new FCC investigation
Verizon, Incompas may draw fire from AT&T, CenturyLink on new BDS proposals
AT&T, CenturyLink slam Verizon/Incompas special access pact
Level 3: Verizon/Incompas proposal will help the FCC establish a sound business data services regulatory regime