How The FCC's Proposed Special Access Market Changes Could Impact Partners

The Federal Communications Commission is leaning toward taking a technology-neutral regulatory stance on special access services in a move that if adopted could inject more competition into areas historically controlled by the incumbent carriers.

Special access services are private lines used by organizations such as banks, hospitals and other businesses. Because the large carriers and cable providers own these lines, these providers can impose contractual rules and have control over pricing and usage.

Last week, the FCC laid out a proposal calling for technological neutrality and increased competition in areas where competition is thin or nonexistent within the special access market. In doing so, the FCC is hoping more regulation within special access services will encourage greater access to the special access networks for the likes of the smaller Tier 2 carriers.

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The FCC has also said the regulation could inspire network innovation and hasten the transition to newer technologies, like cloud-based services.

The proposal comes at a time when new technologies and innovations are starting to hit special access networks, like Internet of Things (IoT) devices and 5G network speeds. And while the incumbent carriers are pushing back against regularity changes within this market, the new rules could stand to benefit solution providers, said Stacey Pompei, vice president of supplier management and general counsel for Petaluma, Calif.-based master agent Intelisys.

"In the long run, partners will have a wider variety of choice, rather than just obtaining services from the large, existing providers. I think it will open partners up to embrace newer technology, faster," Pompei said.

"These [larger] providers obviously like having that control, and they don't want to give it up. The new rules will benefit the smaller providers -- especially those with new technology -- [which will] ultimately benefit partners and customers," Pompei said.

The FCC wants to support the transition to newer technologies, like from time-division multiplexing to Internet Protocol technology. Rules and fees that exist today from the incumbent carriers, such as early termination fees, often stand between businesses and new technologies, she said.

"By reducing the ability to collect early termination fees, for example, or making it easier for people to walk away from their contract, it could take money out of the larger players' pockets," she said.

The FCC is seeking public comment on its proposed special access network realignment, and several carriers have spoken out in protest of the FCC's proposal.

CenturyLink, the third-largest carrier in the country, released a joint statement with Frontier Communications and FairPoint Communications calling the FCC's deregulatory process -- which has been in place for 20 years for business data services -- a success. Disputing the FCC's latest argument, the carriers said the existing policy did foster competition.

The three providers also said that the new regulations would have the opposite effect on innovation, that it would discourage providers from upgrading technology in rural areas.

"Regulatory rate reductions for broadband data services in the highest cost areas will prevent or slow competitive growth and make it difficult for current providers to continue with planned upgrades and future investments," the companies said in the statement.

CenturyLink CEO Glen Post addressed questions about special access during the provider's first-quarter earnings call Wednesday.

"We believe the market for high-bandwidth data services is highly competitive. … We don't believe in heavy-handed regulation. … We think it will only serve to hinder further investments in broadband, especially in rural areas, where it's tough to make the investment work anyway," Post said. "We really haven't been able to quantify what the financial impact could be."

AT&T and Comcast have also responded to the proposed rulemaking via corporate blogs. AT&T is also dubious about what the regulations will mean for incumbent carriers.

"We fear that this proceeding will just be more of the same -- a proposal to increase regulation on services provided by those actually investing in fiber (incumbent providers and cable companies) to benefit a handful of companies that want to continue avoiding investing in fiber infrastructure themselves," wrote Caroline Van Wie, AT&T's assistant vice president of federal regulatory affairs.

In its blog, Comcast accused the FCC of promising "no rate regulation, tariffs, or last-mile unbundling" for broadband services and facilities in the past, but said that it could be going back on its word.

"Despite prior statements recognizing the investment-destroying effects of rate regulation, a majority of the Commission has now embraced and even expanded on the regulatory approach the Chairman rejected only a few months ago," wrote Comcast. "That’s obviously wrong and embarrassingly bad policymaking. If the goal is to promote new entry and investment in business broadband services, the last thing the FCC should do is institute price controls and apply them to new entrants."

Verizon, for its part, has taken an optimistic stance on the proposal.

"Verizon supports a balanced framework that would result in a consistent approach to all competitors, and we are hopeful that the Further Notice will provide a path towards that outcome," wrote Kathleen Grillo, Verizon's senior vice president and deputy general counsel, public policy and government affairs. "Verizon is committed to working with the FCC and other stakeholders to develop a new technology-neutral model -- one that is legally sustainable, that recognizes the changes in the marketplace over the last ten years, that is flexible enough to accommodate new technology and new competitive circumstances going forward," she continued.

The smaller carriers, like T-Mobile and Sprint, are cheering the FCC's proposal. But along with Tier 2 providers, the proposal also stands to benefit suppliers with new technology and business making the shift to the cloud, Intelisys' Pompei said.

"Businesses looking to move to the cloud that are on long-term service contracts, those restrictive termination fees are not allowing them to embrace the cloud. With the new rules that will perhaps lift these fees, businesses could be able to switch to a cloud service earlier … which benefits partners, too," she said.

The benefits of a technology-neutral special access market will ultimately outweigh the arguments that the incumbent carriers are making, Pompei said. And while solution providers partner with the incumbent providers, partners are most concerned about what's best for their customers.

"If the customer is happy on a traditional contract, that's not necessarily going to impact that customer," she said. "But if the customer wants to embrace a newer technology, the [proposed regulations] will give the partner the ability to help with that."