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Colleen Boothby

NoChokePoints Coalition Slams AT&T for Rate Hikes

in Broadband Updates/Broadband's Impact/FCC/Fiber by

WASHINGTON, June 30, 2010 – AT&T’s special access lines are set for price hikes, and the NoChokePoints Coalition says FCC regulation of this “is essential to the health of our information economy.”

The coalition held a teleconference panel discussion Tuesday to call on the FCC to take action and regulate what it says is a rapidly developing monopoly.

“Move special access back to the front burner,” said coalition Executive Director Colleen Boothby.

When SBC merged with AT&T in 2005 for $16 billion, it became the largest phone company in the United States. When AT&T spent $67 billion to acquire BellSouth in March 2006, it became a telecom giant. As part of the BellSouth merger, AT&T agreed to offer reduced rates on interstate special access services until June 30, 2010. The rates will now return to the original pre-merger rates.

The coalition, which includes companies and AT&T rivals such as Sprint, T-Mobile and U.S. Cellular, says it promotes “access to a robust and competitive market for high-capacity broadband” and special access lines.

Frank Simone, assistant vice president, federal regulatory for AT&T, said in an official company a blog post Tuesday that “using the expiration of those discounts as an excuse, some in the industry have decided to resurrect a coalition calling for those discounts to be extended or to have the government impose price controls on those legacy, copper-based special access services.

“Why aren’t the companies that are complaining about our special access prices instead focused on getting their own fiber into buildings they want to serve?,” he wrote.

Special access lines serve the last mile of connection before the home. Businesses, banks and consumers are dependent on these lines because they buy the access running through them from their internet providers.

This is the “nervous system for the nation’s economy,” said Boothby, adding, “every business in America does business through special access.”

Panelist Gigi Sohn, president and co-founder of Public Knowledge, encouraged listeners to compare special access to oil. We don’t buy crude oil directly, we buy gasoline from a gas station; We don’t pay for special access directly, we buy internet service from our providers.

“Companies like Verizon and AT&T control virtually all of the broadband facilities your business depends upon,” reads the coalition’s web site, “That costs you dearly while it generates profit margins above 100 percent for them. Our economy cannot afford it.”

The FCC approved the AT&T merger with BellSouth in December 2006. Although the commissioners voted 4-0, the agency expressed some concern at the time: “In a small number of buildings in the BellSouth in-region territory where AT&T and BellSouth are the only carriers with direct connections, and where entry is unlikely, the merger is likely to have an anticompetitive effect,” the FCC said in a press release.

There was a commitment by AT&T to divest “indefeasible rights of use” to those facilities that the FCC thought would “adequately remed[y] the competitive harm.”

This commitment had a 48-month expiration date. It is now over, and those predictions the FCC made about competition turned out to be wrong, Boothby said.

“This will affect a number of industries, not just broadband,” Boothby continued, enumerating how every industry is going to have to pay more for the service they already had.

AT&T announced these price increases three years ago according to Boothby, but the companies affected by these price hikes could not do the same, their only option being to raise their prices for consumers.

“This is not an insignificant rate increase,” said panelist Paul Schieber, vice president of access and roaming at Sprint Nextel. He said that given the importance of these facilities, the price increases is indicative of the lack of a robust and competitive network.

“They can charge whatever they want,” he said of AT&T and that is what the FCC should address because returns of over 100 percent are unreasonable.

The market for special access is tough for companies that are not vertically integrated, added Sohn.

Parul Desai, vice president of the Media Access Project, said it was important that broadband be available and affordable, adding that during the past two years the special access market has become increasingly concentrated.

All panelists called on the FCC to regulate this area.

TPRC Panelists Discuss Backhaul Issues’ Impact on Broadband Expansion

in Broadband Data/Broadband's Impact by

Editor’s Note: This is the first of a series of panelist summary articles that will be reporting from the Telecommunications Policy Research Conference, September 25-27, at George Mason University School of Law in Arlington, Va.
ARLINGTON, Va., September 25, 2009 – Mobile broadband is the fastest growing segment of the broadband market. According to Jonathan Banks, who directs policy development for the telecommunications industry association US Telecom, the number of wireless broadband users is expected to grow 130% between 2008 and 2012.

These wireless networks rely on special access networks to connect cell towers to the network. This market also consists of financial institutions sending customer information from branches to main offices, as well as businesses processing credit card transactions.

The majority of these networks are run by incumbent local exchange carriers, which are often the sole provider of “special access” services, and which allows them to charge high rates for a relative low level of speed. The average connection speed is around 1.5 Megabits per second (Mbps) with a monthly cost of $390.

Panelists and participants in the event gravitated toward the position that the solution to this problem seems to be increased regulation by the Federal Communications Commission.

Currently, the FCC does regulate the special access market but only puts price controls on about one-third of it; while another one-third is able to have some price flexibility; the rest of the market is allowed to change prices, but is subject to FCC oversight.

Special access providers say that there is currently competition in the U.S., and that the FCC was correct in its decision to deregulate this market. By contrast, the users of the networks claim that in areas of full deregulation – where providers are able to change their prices – the prices never seems to decrease. True competition, they say, does not exist for the last mile.

Panelists for this event included:

  • Dale Hatfield,Executive Director, Silicon Flatirons Center (Moderator)

Adjunct Professor, University of Colorado
Former Chief Engineer, Federal Communications Commission

  • Charles McKee, Vice-President, Government Affairs, Federal & State Regulatory, for SprintNextel Corporation.

McKee is responsible for Sprint’s advocacy before the FCC and state public service commissions for all non-spectrum related regulatory matters.

  • Jonathan Banks directs the USTelecom’s policy development, advocacy and legal work before the Federal Communications Commission, the Federal Trade Commission and the courts. Prior to joining USTelecom, Banks handled federal policy matters for BellSouth, and, prior to BellSouth, he worked on competition matters for the Federal Trade Commission.
  • Colleen Boothby is a partner in the firm of Levine, Blaszak, Block & Boothby, LLP, which specializes in the representation of enterprise customers and providers of emerging information technologies. She joined the firm after ten years of service with the FCC, specializing in telecommunications issues.
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