Frontier says special access changes won't impact revenue, services

Frontier Communications may be a large ILEC that has to provide special access to competitive providers, but it does not see the pending FCC review as having a large impact on how it delivers these services or its revenue base.

Dan McCarthy, Frontier


CEO Dan McCarthy told investors attending the Bernstein 32nd Annual Strategic Decisions Conference that it currently does not make its carrier customers pay penalties if they terminate services too early.

"For us we sell most of our special access to customers under a contract that's below tariff pricing today," McCarthy said. "We have very few contracts that are what the genesis of some of the need for the FCC to take action and those volume commitments with extensive termination penalties to get out are not something we have not had historically."

McCarthy added that although it has gained a few of those contracts via its acquisition of Verizon (NYSE: VZ) and AT&T's (NYSE: T) assets in certain markets, it has taken steps to realign them.

"While we have acquired a couple and we have separated out of them so we don't see that as a big impact," McCarthy said. "We don't see anything impacting the current revenue streams and for those individuals that are going to wind up paying at the rate not having a termination fee, we see it as a forgone opportunity that someone migrated to a different technology."

But lower speed special access is just one issue. The other element of the wholesale market is the ability to provide wholesale Ethernet services, something that Frontier has continued to expand in recent years.

As part of the next stage of its Ethernet buildout, Frontier plans to extend its interLATA and intraLATA E-Path service offerings for into a number of Western and Eastern states in its territory.

Earlier, Frontier added Ethernet Private Line (EPL) to its growing E-Line Ethernet wholesale solutions portfolio, enhancing its local and long-haul access methods for the telco's carrier customers.

McCarthy said that when the FCC completes its analysis of the Ethernet market it will find that there is plenty of competitive choice.

"From an Ethernet perspective, the FCC is looking to ensure that Ethernet is available everywhere at reasonable rates because Ethernet is really the transport mechanism of choice," McCarthy said. "The odd thing is that the vast majority of our markets are competitive from that perspective so as we go through the rulemaking we'll find that's the case."

Special access, or business data services (BDS) and wholesale Ethernet service reform have been divisive issues that current FCC Chairman Tom Wheeler has grappled with during his tenure.

In April, Wheeler proposed four key tenets in his draft Further Notice of Proposed Rulemaking (FNPRM) proposal: identifying competitive markets, taking a technology-neutral approach, encouraging transitions from TDM to IP, and addressing current and future transitions.

The FRNPM also seeks 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 wants the FCC to adopt a final order this year.

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