Verizon, Incompas may draw fire from AT&T, CenturyLink on new BDS proposals

FCC headquarters

Verizon and Incompas submitted new pricing reforms and a competitive market test proposal to the FCC to consider, as the regulator completes their analysis of the business data services (BDS) market, previously known as special access.

In a letter to the FCC, the service provider and the industry group said their latest proposal will enable a more accessible guide for the regulator as it completes the market analysis.

“After continued efforts to find additional compromises, in this letter we set out further proposals for implementing our suggested framework,” Incompas and Verizon said in a joint letter to the FCC. “We think these proposals continue to reflect a middle ground and would result in an administratively simple framework that can help guide the Commission towards procompetitive reform.”

Following the pair’s initial proposal that was submitted to the FCC in April, Verizon and Incompas in June outlined eight additional elements that they said provided a framework for BDS. This latest proposal builds on that framework, they said.

To implement pricing controls, Incompas and Verizon said in their joint June 27 letter that price caps should apply to TDM-based BDS in areas served by price-cap LECs.

Taking it one step further, the two players suggested that the FCC apply the one-time rate adjustment in two phases. During the first year, Incompas and Verizon said that the FCC should cut the Price Cap Index (PCI) by 10 percent with an additional rate reduction based on an X-factor of 4.4 percent minus inflation. In the second year, the group asked the FCC for an additional 5 percent reduction in the PCI, plus an additional rate adjustment based on an X-factor of 4.4 percent minus inflation.

“Going forward, the PCI would continue to be adjusted annually by an X-factor of 4.4 percent minus inflation,” said Incompas and Verizon.

Under this proposal, the FCC could establish a benchmark for the switched Ethernet service that’s closest in terms of quality to TDM-based DS1 special access services that each price cap service provider offers at its lowest speed above 1.5 Mbps -- which is usually 2 or 3 Mbps -- for a three-year term.

Incompas and Verizon said this process “would equal the carrier’s tariffed, publicly available DS1 special access circuit rate for a three-year term, after applying the full one-time adjustment and annual X-factor minus inflation adjustment” and the “DS1 circuit rate would include the rates for one channel termination, one fixed mile, five variable miles and 1/20th of a DS3/DS1 multiplexing arrangement.”

After establishing the higher Ethernet speed benchmarks by applying the price-cap carrier’s respective relationship of rates for higher-speed Ethernet services to the lowest-speed Ethernet services, the Ethernet rate relationship would be developed using the rates in each price-cap carrier’s publicly available product guide.

The second part of their expanded BDS proposal suggests that the FCC develop a competitive market test. This would classify a facilities-based provider as one that has an actual customer or connection in a census block served by service provider that owns its own copper or fiber network facilities.

“In measuring the number of such providers needed to demonstrate that a census block is competitive, we propose the Commission should measure the number of providers in either the census block or any adjacent census block,” Incompas and Verizon said. “We are continuing to discuss how many providers we think would be enough to deem a census block competitive, but agree that it should be more than two.”

It’s likely that the latest Incompas/Verizon proposal will again draw fire from AT&T and CenturyLink, two providers that have been outspoken about the FCC’s BDS proceedings.

AT&T said in its BDS comments to the FCC that the regulator should not propose any rate regulation on Ethernet services, either through benchmarking or through a retail-wholesale relationship.

The telco suggested that the FCC adopt a competitive market that finds a census market tract for competitive under-50 Mbps services where there are at least two facilities-based competitors within the tract. AT&T noted that 90 percent of AT&T’s sub-50 Mbps bandwidth is within a half mile of competitive fiber.

In a previous letter to the FCC, AT&T said the Incompas-Verizon proposal is nothing more than a “joint advocacy to advance their common interests." The telco said that since Verizon sold off a large portion of its wireline assets to Frontier it has become a net purchaser of BDS services.

For more:
 - read this FCC letter (PDF)
- here’s AT&T’s latest BDS take

Related articles:
Verizon, Incompas propose new 8-point special access plan, encourage facilities-based competition
Verizon, Incompas call truce in special access regulation war
AT&T, CenturyLink slam Verizon/Incompas special access pact