Cbeyond Asks FCC for Mandatory Wholesale Optical Access

Cbeyond has the Federal Communications Commission to reverse its rules on wholesale obligations for fiber-to-customer networks. On copper access networks, competitors have rights to buy wholesale access. The FCC has ruled that on new fiber-to-customer networks, competitors have no similar rights.

Predictably, incumbents say the current rules should remain in place, which allow any voluntary wholesale deals, but do not require incumbents to offer wholesale access. The rules are consistent with rules that apply to U.S. cable companies, which likewise have no obligation to sell wholesale access to competitors.

The Telecommunications Industry Association  and the Fiber-to-the-Home (FTTH) Council have filed comments opposing the change.

The debate is an old one. Incumbents argue that the business case for FTTH is troublesome, and that they need the ability to profit from FTTH investments without being required to make those faciltities available to competitors who do not have to build expensive facilities of their own when they can simply lease capacity from others.

Though it is difficult to prove, one way or the other, the FCC has faced a dilemma. It can seek to spur competition by mandating robust wholesale access, or it can spur deployment of new optical access facilities, but might not be able to achieve both goals.

The reason is that incumbents can simply refust to upgrade their networks when they do not feel they will get an adequate financial return. There is some important evidence that incumbents are right about the ability to raise investment capital for FTTH.

Investors punished Verizon Communications for pushing ahead with its FTTH program, preferring AT&T's less-costly FTTN approach, for example. Calle and telco executives point out that all competitors are free to build their own facilities if they want, and most observers would note that in markets where there are three ubiquitous FTTH or FTTN networks, it has proven difficult to sustain business models allowing all three competitors to remain in business.

The calls for mandatory wholesale come at a time when everybody acknowledges that the business case for traditional cable TV and voice services is becoming more difficult, and that neither cable companies nor telcos can rely on their mainstay businesses (video and voice) for future growth. In fact, both types of companies are seeing steady shrinkage of those legacy businesses.

Under such circumstances, and given the shift to Internet-based applications, it might not make lots of sense to weakent he business case for robust optical access investments at a time when the financial returns for doing so are under pressure in any case.

Supporters of mandatory optical access obviously would benefit from a rule change, as they could offer optical access without incurring the expense of building new facilities. So the dilemma the FCC faces is an emphasis either on innovation or competition, in some clear sense.

Since virtually all applications now can be delivered over IP-based connections, it no longer makes as much sense as it once did to directly link "access" and "competitive" services. With or without broadband access, companies now can deliver virtually any service over the top, on any broadband connection.

Under such circumstances, robust competition occurs at the application level, not the access level. In fact, that is precisely the problem telcos face with VoIP, and that cable companies face with online video.