Lately, it’s been like the 1990s all over again at the FCC. Forget the endless battle over net neutrality — since mid-summer the Commission has been in the midst of an all-out telecom war over telephone rates and broadband regulation — with the Bell companies squaring off against Sprint, competititive access providers such as Covad, and others. Their are two overlapping issues: should the FCC reverse it’s deregulation of of “special access” lines used by CLECs, cell carriers and large businesses, and (going in the other direction) should the FCC further deregulate high-capacity broadband services to large enterprises. Last year, AT&T filed a petition for such deregulation. Under federal law, if the Commission doesn’t act on that petition by midnight tonight, it automatically becomes law. For an excellent run-down of the issue, see fellow TLFer Hance Haney’s post here, as well as his op-ed from today’s Washington Times here.)
For months now, the two sides in this debate have been slinging statistics back and forth on the state of competition in these markets. Regulation proponents point to the high number of buildings that only are served by one carrier. But these numbers can be deceptive. As AT&T and Verizon point out, a high proportion of customers seem to be clustered in buildings with competing lines. More important, the market can’t be seen in static terms — the mere existence of a competitor nearby can constrain prices, as can the growing availability of wireless and other alternative technologies.
Almost lost in the back-and-forth, however, has been one major point: despite all the complaints about the state of the market, prices for special access lines have largely decreased, not increased. This fact was brought out in a hearing last week before the House Commerce Committee on topic, when Rep. George Radanovich asked each of the major proponents of regulation whether they’ve seen price increases. Their answers:
Larissa Herda, Time-Warner Telecom: Specifically with AT&T’s rates, they have their wholesale rates and they’ve been locked out…They have had their restrictions as a result of the acquisitions that they’ve made on increasing rates. We have seen carriers like Qwest for instance who raised their rates in 2004 17-18% across their entire region. So we have seen a slow rise, or actually in that case, that was a rather large rise, that is quite expensive to our business. We couldn’t do anything about it because they were allowed to make those changes.
Gary Forsee, Sprint-Nextel: Yeah, we try to distinguish between rates that in fact may have come down. I can’t speak specifically to the rates of return that the companies are earning as a result of the rates that remain in place. So while the costs of providing that service have come down more dramatically, yet the rates may have come down disproportionately, not
as much.
Brad Evans, Cavalier Telephone: Yes, I’m not personally familiar with whether they’ve gone up or
down. They are lower in AT&T’s region than they are in Verizon’s region.
None could say that rates from AT&T and Verizon had gone up, and only one could point to any rate increases at all. For a market that supposedly has been monopolized in recent years, that’s pretty surprising. (In an apparently unrelated move, Gary Forsee was dumped by Sprint only a few days after the hearing.)
When all is said and done, the high-speed markets at issue here seem to be working pretty well (although more information would certainly be helpful). Yet, as reported in today’s Wall Street Journal, it looks like the FCC will end up compromising on this issue — with a deal to tighten regulation of special access, while accepting the AT&T petition. A deal of this sort may be the best that can be hoped for — although the devil will of course be in the excruciating details.
Stay tuned.
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.