FCC Moves Forward on Wholesale Telecom Cost Inquiry

The U.S. Federal Communications Commission has issued a wide-ranging request for information about competition in the market for wholesale, high-capacity broadband networks across the nation, earning the agency praise from consumer and business groups that say large telecom carriers have overcharged for the infrastructure.

The FCC's request for data, released late Thursday, represents a "significant step" toward a revamp of so-called special access fees, said Colleen Boothby, executive director of the Ad Hoc Telecommunications Users Committee, representing several large-business telecom customers.

"This is an issue that costs American businesses a lot of money, day after day after day," Boothby said. "Getting the price and getting an accurate view of the marketplace is especially important for the commission to do right now, when so many businesses are facing an economic downturn. They can't afford to have their pockets picked."

The questions asked in the FCC's Thursday request show the agency is serious about looking into special access fees, the rates that businesses and other large telecom customers pay for connections to carriers' central switching facilities, said Charles McKee, vice president of federal and state government affairs at Sprint Nextel, a major customer of special access lines for wireless backhaul.

The FCC request asks specific questions about the amount of competition and the capacity of special access lines in 24 metropolitan areas across the U.S. The questions are targeted at large-carrier providers such as AT&T and Verizon Communications, but also at customers and competing telecom carriers, McKee noted.

A next step for the FCC could be to ask specific questions about pricing, Boothby said. "This information is going to tell them ... in stark terms that this market is not competitive," she said. "They're going to have to get pricing information and cost information."

The No Choke Points Coalition, a group formed in mid-2009 to push for lower special access fees, estimates that large telecom carriers generate more than US$18 billion a year from special access, with most of the money going to Verizon and AT&T.

The FCC deregulated special access fees a decade ago, and some telecom customers have been calling on the agency to investigate prices for most of that time. The agency issued a notice of proposed rulemaking in 2005, but took no action until new Chairman Julius Genachowski resurrected the issue in a national broadband plan released in March.

AT&T has downplayed the concerns, saying in June that groups calling for special-access-fee reform are largely focused on old, copper-based infrastructure. Businesses should instead invest in fiber-based connections to their buildings, Frank Simone, AT&T's assistant vice president for federal regulatory affairs, wrote in June.

Still, AT&T welcomes the new FCC questions, said AT&T spokesman Michael Balmoris.

"We have said from the onset of this proceeding that data from all providers is essential to answering questions about competition for the services at issue here," he said. "The FCC cannot make an informed decision about competition for these services unless it receives data from all market participants. This is the third time the FCC has requested data on a voluntary basis, we have responded each time, others have not."

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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