USTelecom touts study saying special access regulations will stifle broadband growth

As the FCC proposes new pricing controls over special access services, a new study commissioned by USTelecom argues that the move could have grave consequences on broadband investments and the country's job market.

The report, written by Hal Singer, principal of Economists, Inc., said that updated special access pricing regulations could result in 43,560 jobs being cut, a drop in economic output of $3.4 billion over a five-year period, and would prevent 67,000 buildings from getting access to fiber.

The report emerged as CLECs that provide business broadband services plead with the FCC to set market rates and give them discounts on special access services, so that business customers have more choice at competitive rates.

Singer argued that there was no evidence of lack of competition. He pointed out that prices for some business broadband services declined between 7 and 17 percent from 2013 to 2015.

Citing a familiar tone set by US Telecom members AT&T (NYSE: T) and Verizon (NYSE: VZ), Singer wrote that competitive providers like Level 3, Lightower and Zayo continue to emerge. Collectively, about 30 competitive service providers have installed fiber into over 267,000 buildings with fiber across the United States, laying over 650,000 route miles of fiber, or 2.42 route miles per building, the report said.

To assess the impact of how FCC's pricing models might alter competition, Singer created an economic model with Charlotte, N.C., as a test bed -- chosen because it has a population and supply of office buildings considered representative of an average U.S. city. The assessment looked at service providers' ability over a five-year period to light buildings with fiber to offer high speed optical and Ethernet services to businesses.

Singer found that if fiber-based networks were not regulated service providers would be able to light nearly 122,000 buildings nationwide, representing $9.9 billion in capital expenditures and 4,900 new fiber route miles.

Conversely, he said, implementing new regulations would halve projected investment to an estimated $4.4 billion, providing fiber to only 55,100 buildings with 2,200 new fiber route miles.

"It is unfortunate that some are calling on the FCC to adopt policies that meddle with the competitive dynamics that have been increasing choice and lowering costs for business broadband customers," said Walter McCormick, president of USTelecom. "As this paper illustrates, a competitive business broadband marketplace has emerged in the United States just as Congress envisioned when it passed the 1996 Telecommunications Act."

Not everyone agrees with USTelecom's assessment.

A study from the Consumer Federation of America (CFA) estimated that the incumbent telcos' hold on the market has cost consumers over $150 billion since 2010.

Further, the CFA said that large ILECs like AT&T and Verizon have engaged in abusive pricing practices for high-speed broadband special access services, with overcharges totaling about $75 billion over just the past five years.

For more:
- see USTelecom's release

Related articles:
CFA says incumbents hold on special access market cost consumers, U.S. economy $150B since 2010
TDS disagrees with AT&T, says it's not asking FCC to reimpose price cap on Ethernet services
Kovacs: No case for special access reregulation
Level 3 says special access customers should have more choice in commitment
Verizon to challenge cable operators with 'Titan' business Ethernet program

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