Level 3 says special access customers should have more choice in commitment

Level 3 continues to fight for special access reforms, telling the FCC that service providers that buy services under the ILEC's so-called lock-up plans should be able to set the size of the volume commitments.

Competitive providers have estimated that by easing restrictions on who competitive provider buy bandwidth from could boost their revenues by as much as $86 million combined.

Under Level 3's proposal, the volume provisions would be lawful and ILECs would be able to establish various discount levels for different volume commitments under a plan as long as the customer is free to choose the level of its volume commitment. Additionally, the discounts offered would have what Level 3 said in a FCC filing is a "reasonable relationship to the cost savings experienced by the incumbent LEC as a result of selling the volumes at issue."

However, Level 3 said it is concerned that this kind of reform could "be undermined if incumbent LECs impose unreasonably long terms on plan customers" so it asked that the FCC should not permit ILECs "to set the term of a volume commitment longer than two years (as is currently available under the AT&T ACP,4 for example)."

In the current tariff regime set by the ILECs, a customer's volume commitments lack the flexibility to set their volume commitments at appropriate levels given market conditions.

"Customers are often unable to meet volume commitments for DS1 circuits that are set based on past purchase levels because the demand for such circuits is steadily declining," Level 3 said. "In addition, customers that purchase DS1 services under the lock-up plans are unable to set their volume commitments at levels that account for their need and ability to switch circuits to competitive wholesale providers during the life of a plan. This in turn suppresses wholesale competition."

Besides increasing competition, the proposed reform would help drive transition from TDM-based special access to IP-based Ethernet services.

"If customers can choose the size of their volume commitments, then they can identify circuits where they would like to use a competitor and not include those circuits in their volume commitment to the incumbent LEC," Level 3 said. "This will dramatically reduce the lock-up effect of the plans, allowing customers to purchase from non-incumbent LEC competitors. That will in turn increase competitors' investment in fiber facilities, which will promote the technology transition."

Speaking of Ethernet, the proposal calls for the FCC to require that buying Ethernet-based special access service counts towards the volume commitments in the ILECs' lock-up plans. Even though many competitive carrier customers want Ethernet-based services, providers like Level 3 can't count their Ethernet purchases from incumbent telcos like AT&T (NYSE: T) and Verizon (NYSE: VZ) toward their volume commitments depending on the terms of the lock-up plan.

However, under current lock-up plans CLECs can't buy more Ethernet services to fulfill business customers' demands without being charged for not making their commitments.

"As a result, competitive carriers cannot purchase the large volumes of Ethernet services demanded by retail customers without running the risk of failing to meet their volume commitments and incurring large shortfall penalties," Level 3 said. "This has the effect of undermining the technology transition to Ethernet. For example, some customers opt for DSn dedicated services when they would rather purchase Ethernet."

For more:
- see the FCC filing (PDF)

Related articles:
Level 3's Storey: Lock-up agreements are stalling company's growth
Level 3: Freeing CLECs from ILEC lock-up plans for special access can spur $86M revenue boost
Verizon joins ILEC chorus against special access, saying Ethernet services should not be regulated
Level 3, Birch and BT Americas say FCC has power to regulate ILEC special access rates

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