more on FCC Approves of Mergers

[David Farber <dave () farber net>]

Begin forwarded message:

From: "Levine, Hank" <hlevine () lb3law com>
Date: November 1, 2005 4:46:14 PM EST
To: dave () farber net
Subject: RE: [IP] FCC Approves of Mergers

For IP, if you want:





One odd thing about the FCC's approval of the mergers was the  
condition requiring AT&T and MCI to stabilize their rates for  
wholesale special access services for a couple of years.



Loss of competition in the special/dedicated access market was a  
major worry in connection with the mergers, because the dedicated  
pipes (usually DS-1’s or DS-3’s) connecting enterprise customer  
locations to the public telephone network or the Internet are  
‘bottleneck’ facilities provided on a near-monopoly basis by  
incumbent local exchange carriers. As a result of that monopoly,  
special access rates (unlike other telecom rates) have actually been  
rising in recent years, and the LECs’ rates of return on special  
access are in the 40-80% range.   MCI and AT&T had each built their  
own facilities to a few thousand commercial buildings in the last  
decade [only a few percent of the total, but better than nothing],  
which means that without conditions the mergers would have led to a  
substantial diminution of what little special access competition  
there is in the Verizon and SBC footprints.



DOJ and the FCC dealt with this in a couple of ways, like requiring  
the sale of IRUs to competing carriers.  The consensus among users is  
that these may have been better than nothing but weren’t very good.  
The “safeguard” that makes the least sense, however, is the one noted  
above, if it means what it seems to mean.



Local exchange carriers sell most special access to interexchange  
carriers, who in turn sell it to end users.  So requiring  
stabilization of LEC rates for wholesale special access services  
makes some sense.  But AT&T and MCI sell most of the special access  
they buy from the LECs to end users, so requiring them to stabilize  
only their rates for wholesale services doesn’t do much for  
enterprise customers, if the use of “wholesale” in the press release  
means rate stabilization is limited to AT&T’s/MCI’s IXC and CLEC  
customers.



You could argue that if these few remaining smaller carriers are  
assured of access at decent rates this will ‘discipline’ AT&T/SBC and  
MCI/Verizon, but aside from Sprint and maybe Qwest the smaller  
carriers have essentially zero penetration (beyond commodity voice  
minutes) in the enterprise market.  And the major carriers use  
interconnection fees with exotic names [AC, ACC, COC] to prevent  
customers from buying special access from carrier A and using it to  
transport traffic to Carrier B’s network.  So AT&T’s and MCI’s prices  
for “local private line services,” i.e., re-sold special access, are  
the ones that matter to enterprise customers.  Why deny rate  
stabilization to the very customer group that needs it most?



“Wholesale” has often been used in sloppy ways, though, and the FCC  
has been guilty of that sloppiness in the past.  Maybe the reference  
to “wholesale” is meant only to indicate special access purchased  
from LECs for resale to high-volume customers.



And here’s the kicker – because of the FCC’s ‘sunshine’ rules, until  
the full text of the FCC’s order comes up, you’re not allowed to call  
up and ask.





Hank Levine

Levine, Blaszak, Block & Boothby, LLP

2001 L Street, NW., Suite 900

Washington, DC 20036

* (202) 857-2540

*    Fax (202) 223-0833

*  hlevine () lb3law com





-------------------------------------
You are subscribed as lists-ip () insecure org
To manage your subscription, go to
 http://v2.listbox.com/member/?listname=ip

Archives at: http://www.interesting-people.org/archives/interesting-people/