Verizon dismisses Windstream's wholesale, retail business data price squeeze claims

FCC headquarters

Verizon says Windstream's claim that the incumbent telco industry is engaging in a price squeeze for Ethernet services is unfounded and that the FCC does not address such an issue in its special access proceeding.

In an FCC filing (PDF), Verizon said that there’s no legal precedent that says service providers have to offer a price differential between wholesale and retail business data services.

“In this proceeding, no commenter has provided evidence sufficient to meet these elements for business data services,” Verizon said. “Claims of an anticompetitive price-squeeze in business data services also are at odds with economic logic and the facts of the marketplace.”

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“In this proceeding, no commenter has provided evidence sufficient to meet these elements for business data services,” Verizon said. “Claims of an anticompetitive price-squeeze in business data services also are at odds with economic logic and the facts of the marketplace.”

Verizon added that if the FCC finds that Ethernet wholesale rates exceeded retail rates, the telco will drive the FCC to conduct a deeper investigation into the pricing methods.

“Even if it were the case that wholesale rates do exceed retail rates for like services, as a matter of economics and antitrust law, that does not necessarily demonstrate an anticompetitive price squeeze but instead just prompts further inquiry into the justifications for such pricing,” Verizon said. “So if the Commission were to find evidence of little or no gap between retail and wholesale rates, it would still need to conduct a more searching inquiry to determine whether that gap is justified by costs, competition, or other legitimate reasons.”

RELATED: Frontier says BDS price caps will mean $10M revenue impact in 2017

For its part, Windstream argued in a previous FCC filing (PDF) that ILECs have been charging competitive “providers prices for last-mile Ethernet inputs that are equal to or greater than the prices charged to end-user customers for substantially the same capacity, even though an ILEC avoids substantial costs when providing the service to a carrier customer instead of an end-user customer.”

According to Windstream this practice “means competitive carriers have to pay for retail costs twice – once in operating their own retail sales team and fiber network beyond the last mile, and again to the ILEC, which charges for these costs even though it is not the carrier actually incurring them.”

Windstream claims that a lack of competitive choices for last mile connectivity would translate into higher priced Ethernet and internet services for small business, government, non-profit, and community-anchor institution (such as libraries and schools) customers.

FCC Chairman Tom Wheeler made his long awaited BDS proposal public last week. While the proposal would offer a light touch regulatory regime for next-gen Ethernet and packet-based services -- for which competition from cable and CLECs is emerging -- TDM services would continue to be governed by existing “price cap” regulation.

Under Wheeler’s proposal, the FCC proposed implementing a one-time 11 percent pricing decreased that would be phased in over 3 years, beginning in July 2017. Specifically, this includes 3 percent in the first year, 4 percent in year two, and 4 percent in the third year. This is below the 15 percent cut proposed by Verizon and industry group Incompas several weeks ago.

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