Elections Matter: Competitive Carriers Challenge Telco Wholesale Pricing

In the U.S. communications business, some things don't change, and among those unchanging realities is that competitive local exchange carriers believe they should have widespread rights to use access facilities owned by the former Regional Bell Operating Companies (Qwest, Verizon and AT&T), paying wholesale prices with healthy discounts.

The former RBOCs just as vociferously argue that such access should be available, but not on a mandated basis, and only at market-based rates. Those fights were particularly fierce earlier in the decade, but have been relatively muted over the past several years. But nothing is ever completely settled in the communications business.

Eight competitive communications providers and Comptel have asked the Federal Communications Commission to adopt rules that would lead to lower prices for broadband access and transport. The petition for "expedited rulemaking" will not, as its name suggests, result in anything actually happening very soon.

The request must, by law, be circulated for response, and those responses will be vigorous. The request also comes at a time when larger issues, especially the shape of a new national broadband policy, are being weighed as well.

Comptel, 360networks, Broadview Networks, Cbeyond, Covad Communications, NuVox, PAETEC, Sprint Nextel and tw telecom have asked the FCC to create new procedures that would require the former Bell Operating Companies to offer wholesale access at "going-forward rates," plus a "profit margin or markup" of about 22 percent.

The concept is arcane for anybody who is not a communications policy expert or communications attorney, but essentially boils down to a competitor belief that prices are too high, and that the changed political complexion of the FCC will allow changes more in line with CLEC thinking both on mandatory wholesale and robust discounts on wholesale facilities used by competitors.

The perhaps unstated hope is that the forthcoming national broadband plan might address terms and conditions for mandatory wholesale access to optical broadband facilities owned by the former RBOCs, something competitive providers would dearly like to win, and which existing rules do not support.

Still, the petitioners do not expect immediate action, as the request has to be circulated for public comment, and will, as usual, face heated opposition from Qwest, AT&T and Verizon.

Still, it has to be noted that elections have consequences. The new petition might not have been deemed to have a chance of upside in the previous presidential administration.

Cbeyond Eyes Pittsburgh: Thank FCC

Pittsburgh is on a short list of new markets Cbeyond now is is reviewing. And the recent Federal Communications Commission decision that several Verizon markets were not yet sufficiently competitive to relax wholesale special access rates (broadband access services such as T1s and DS3s)can be credited, in part, for the interest.

The FCC ruling means Cbeyond can buy T1s at discounted rates, and that's quite helpful for Cbeyond's business model, which typically involves provision of voice and data services to small businesses over one or two T1 lines.

Cbeyond apparently has been considering Pittsburgh for some time but the FCC ruling was pivotal, Cbeyond Vice President and Corporate Counsel Bill Weber says.

"Had that FCC decision gone the other direction, in all likelihood we would have never come to Pittsburgh because it would no longer be possible for us to make money," Weber said.

Cbeyond might not begin operations in Pittsburgh, should it decide to expand there, for as much as two years. Typically a fierce competitor in the small business market everywhere it operates, Cbeyond will run into Comcast in Philadelphia as well as Verizon and other providers.