In order to promote competition in the business broadband market, the FCC must adopt protections against the restrictive and unreasonable terms and conditions that frustrate the development of competition. The unreasonable terms and conditions contained in legacy monopoly providers’ special access purchasing arrangements “lock up” the special access market and prevent competition from developing. The FCC’s insufficient enforcement of the Communications Act permits the legacy monopoly providers to retain and exploit dominant market positions and earn supracompetitive returns on their special access services – all at the expense of customers and consumers.


Issue:

Special access services are the “last mile” connections that connect the nation’s businesses and cell towers to the public communications network. Legacy monopoly providers (also known as incumbent local exchange carriers) leverage their dominant market positions for special access services to ensure that effective competition will not emerge. While each legacy monopoly provider accomplishes this slightly differently, their strategy generally works this way: Knowing they control the vast majority of special access connections in their service territories, they set their so-called “list prices” for special access at exorbitant levels, proceeding to only offer a “discount” to carriers that agree to “lock up” all, or almost all, of their special access purchases from that legacy monopoly provider -- even where competition may be present. Since special access is a vital input to both the wired and wireless world, competitors are left with no choice but to agree to the “lock-up” terms, otherwise it will be excluded from the market and unable to offer competitive services. Given this “choice,” most large customers are locked up by the legacy monopoly providers and cannot buy more that an immaterial amount of special access from other providers. These practices foreclose competition, raise prices to consumers and are unjust and unreasonable.

 

 

Position:

In order to spur competitive build out for high capacity special access services, the legacy monopoly providers should be, among other things, prohibited from “locking up” or enforcing existing “lock-ups” of more than 50% of a customer’s special access demand.