The FCC must reform rules governing special access. Special access services are the “last mile” connections that link the nation’s businesses and cell towers to the public communications network. The FCC’s failure to enforce the requirements of the Communications Act (“ the Act”) that apply to special access services has allowed the legacy monopoly providers to accumulate overwhelming market power, raising broadband prices for all customers.
In the vast majority of locations, the legacy monopoly providers (also known as incumbent local exchange carriers) control the only wireline connection that can be used to provide special access. Consequently, the legacy, monopoly providers have overwhelming market power in the provision of special access services. The Act requires legacy monopoly providers to offer special access on reasonable rates, terms and conditions, but the FCC has failed to enforce this requirement.
The FCC’s bad decisions and lack of enforcement regarding special access services have left broadband consumers and providers with high prices and have limited innovation. Based on erroneous predictions that the legacy monopoly providers’ bottleneck control over special access would erode, the Commission removed pricing constraints on most of the special access services provided by legacy monopoly providers. Starting in 1999, the FCC adopted “pricing flexibility” rules for special access services that utilize TDM technology; application of these results as resulted in the elimination of pricing limits in many urban areas. In a series of decisions starting in 2006, the FCC made matters worse by removing the rules governing prices for packet-switched special access services, such as Ethernet. The FCC acted without ever determining whether the legacy monopoly providers are dominant in the provision of packetized special access services. As a result of these decisions, legacy monopoly providers have been permitted to overcharge purchasers of special access. In addition, legacy monopoly providers have conditioned the availability of “discounts” on compliance with terms and conditions that lock up the market and prevent competition from developing – Reform of Anticompetitive Terms and Conditions. American businesses have borne the brunt of the FCC’s failure to enforce the requirements of the Act in the special access market, resulting in higher prices, inferior service, and less competition.
The FCC must reform its special access rules as soon as possible, especially the rules applicable to packetized special access that are most suitable for the provision of next-generation services. Special access pricing reform could generate up to 100,000 additional jobs and increase consumer welfare by $11.8 to $12.4 billion, according to a recent study by Economists Incorporated. Without access to these bottleneck services on just and reasonable terms, businesses throughout the economy are harmed.