IP transition shouldn't be a license to price gouge CLECs, business customers, says Windstream

Windstream says in two new filings it made with the FCC that the incumbent telcos' move to an all-IP network, while promising in terms of new services, should not give them license to raise prices on wholesale circuits they provide to CLECs, a factor that would increase costs for the small to medium businesses (SMBs) they serve.

On Monday, Windstream submitted comments on two proceedings that address competitive concerns in the business services market: the FCC's Technology Transitions Notice of Proposed Rulemaking, and Windstream's Petition for Declaratory Ruling regarding incumbent carriers' obligations to provide access to unbundled high-capacity loops.

Being a hybrid CLEC and ILEC, Windstream is in an interesting position in dealing with the IP transition and using ILEC last mile facilities.

Like other service providers, Windstream is an advocate of using fiber wherever it can, but in many situations where it is serving either an SMB that only needs a lower speed connection or the site of a multi-location enterprise, it often can't prove a business case to build fiber facilities to these locations. That means that it has to obtain access to a local ILEC's copper or fiber loops to deliver service.  

"While competitive carriers like Windstream are investing heavily in fiber networks, competitors still require access to incumbent facilities in the last mile, where overbuilding usually is uneconomic," Windstream wrote in an FCC filing. "This is because -- as the FCC has repeatedly reaffirmed -- the fundamental economics of network construction have not changed. If permitted to evade existing access requirements via a technology transition, incumbent carriers would obtain unfettered power to force through significant price increases for both wholesale and retail last-mile connections."

A number of state public utility commissions, including Pennsylvania and Vermont, support Windstream's petition that ILECs should still be required to provide DS1 and DS3 connections on an unbundled basis after they have made their technology transitions to IP and all fiber.

For example, the Pennsylvania Public Utilities Commission finds that competitive carriers "continue to rely significantly on wholesale access to the last mile facilities of the ILECs," wrote Windstream in its filing. "This is especially true in those cases where the potential return on investment from serving the needs of lower demand users, such as residences and small businesses, does not justify the cost of overbuilding a redundant network over that of an incumbent. The Vermont Public Service Board and Public Service Department echo this concern."

At the same time, the service provider is concerned that as ILECs like AT&T (NYSE: T) decide to replace legacy TDM-based circuits with Ethernet, there will be a large price disparity. The service provider said that there is a "more than eight-fold increase when moving from a TDM DS1 to a 2 Mbps Ethernet service."

Although AT&T said that such price increases "may usually be the case" when ILEC discontinues access to wholesale inputs, the result is that it will raise prices for CLECs that are trying to provide services to smaller businesses at competitive rates.

"Large price increases harm competitors' ability to continue providing services to their business service customers, and constitute good evidence that the marketplace still is not capable of providing a sufficient check on wholesale pricing for lower bandwidth services used by CLECs and those customers," wrote Windstream.

Related articles:
Windstream to FCC: Competitive choice should not be reduced in IP transition
FCC's Wheeler: IP transition is not a license to limit competition
Windstream wants ILECs to price IP-based wholesale special access services fairly
Windstream asks FCC to investigate AT&T's special access increase proposals
FCC begins special-access data-collection process, but competitive carriers want fair prices